Air China Cargo's Market Leadership and Profitability - Case Study Example

MARKET LEADERSHIP AND PROFITABILITY BUSINESS PROJECT PROPOSAL FOR CHINA AIRLINES CARGO Name Code & Course Professor’s name University City Date Background Airline Industry The airline industry is positioned based on first flights, military aviation, commercial aviation and general aviation across the globe. Based on the changes in aviation regulation act of 1978, the new act advocated for increased competition within the industry that was previously dominated by handful of giant companies such as Delta and American airlines (Matolli 2014). Research conducted by the U.S. Department of labor indicates a growing demand for regional and international Air travel (Erraitab 2016). China Airlines Cargo China Airlines was founded in 1959 in China hence the largest Taiwan Carrier. Currently, the company operates with 86 cargo aircrafts that manages to serve 27 countries across the globe hence 97 destinations. The company major cargo hubs such as Bangkok and Osaka tend to optimize routes hence a smooth connection between regional’s and continents flight services. Achievement The importance of the business plan strategizes on how China Airlines Cargo needs to secure leadership position and improve on its profitability in Airline cargo industry. Recent research indicates the Airlines China cargo profit goes down by 32% in 2013 due to intensified competition and the weak demand for Air cargo (Chiu 2014). As such, the net profit reduced from CNY 4.91 billion to CNY 3.32 billion (Chiu 2014). Based on leadership position, The Aircargo news indicated that china airlines cargo is dropping down on its cargo supply by 8.2 % thus 60.6% from 74.3 % (Aircargonews 2016). The strategy is based on identifying the customer preferences in service delivery hence provision of high quality services. The new services tend to target markets that are poorly or undersubscribed by the existing direct and indirect competitors hence improving on its market shares. The strategy is based on changing routes and targeting express market such as Australia/New Zealand (CAPA 2013). Literature Review Performance and Service Quality Studies indicate a positive relationship between organization performance and customer satisfaction hence a positive correlation between company profits and its successfulness (Gilaninia 2013). Additionally, resolving customer’s complaints regarding the company services, advocates for retaining the client’s loyalty hence organization profitability. As such, Airline cargo industry greatly focuses on customer services by handling claims expeditiously, ability to solve problems promptly while having a knowledgeable sales force. Growth of Airfreight Research conducted by The International Air Cargo Association (TIACA) predicts that the cargo Airfreight is expected to triple in the next 20 years with a growth of 6.7% annually (Mitra 2014). As such, China Airlines cargo needs to take the advantages of such opportunities to position it in global markets. Additionally, findings predict greatest growth in intra-Asian freight market, North America-Asia, Europe Asia and the North America-Europe at 9% annually in each continent (Hamanaka 2013). In the process, China Airlines cargo needs to have a strategy on such market so as to improve on its market share hence leadership position and gradual increase of profitability in the company. Customer Satisfaction and Loyalty Research indicates that the greatest barrier to the airline industry to effective service recovery that is only complained by about 5-10 % of customers while other clients that are unsatisfied silently switch to other service providers while making negative comments about the previous company (Li 2015). As such, advocating for service recovery technique through hiring, training and empowerment in services provides the company easy access to complaints and effective responses in call centers and customer database. Information Technology The information technology is imperative due to its advantage in engaging with business partners hence making the services more reliable and very fast to the customers (Feizi 2013). As such, the use of Electronic Data Information (EDI) to China Airlines cargo would able to monitor the progress of the cargo across the globe to its destination successfully. Logistic Service Providers Logistic service providers are a critical tool in the success of the company successful supply chains. As such, provider strategizes on the company financial performance based on its amount of assets, the level of cash flow, productivity level and improvement in service delivery (Minyoung 2015). For China Airlines cargo to grow and attain leadership position while increasing on its revenue, the company requires a well performing logistic service delivery that is of customer satisfaction and loyalty so as to attain its achievements. As such, the logistic service providers would be essential in getting the cargo to the consumers based on consumer preference, increasing the flights destinations, through procurement and outsourcing of cargoes, cargoes management, transportation, distribution and strategizing on inventory management on supply chain system in efficiency and effectiveness Situation Analysis Frameworks SWOT Analysis Strengths China Airlines Cargo Company enjoys the well-trained employees that are experiences both in local market and international market. The company managed to employ at least 2,300 pilots and a total of 4,520 hence diverse focus on the management of people through productivity, teamwork and supplier network through partnership (Ahmed 2013) The upturn in the global economic cycle has boost confidence in China Airlines Company. Based on the growing domestic market, the airline industry is expected to grow at a rate of 10-15 % per annum in china while the global market is expected to be more than 4% (IATA 2013). Weaknesses The company is competing across broad international and domestic market with competitive airfreight giants and local operators. Additionally, the company is unconsolidated hence poor competitive strategy in the market (ATKEARNEY 2015). As such, unplanned strategic direction contributes towards the company low profitability and utilization of capacity while varied service initiatives are copied by competitors. In the process, the company brand is confused in the market. Opportunities The global airline deregulations make the skies easily accessible hence route agreements across continents are easier to achieve. As such, China Airlines cargo needs to focus on such opportunities to increase its business hence leadership position and higher profitability. Additionally, improving the company efficiency through pilots rescheduling, crew on time management, modernizing company sales and branding the company services while driving other sources of revenue are the best opportunities for the company. Threats The company faces the threat due to the aggressive competition from the world leading airlines based on technology and low-cost subsidiaries that tend to provide customers with much more options. Based on the airfreight market demand, new entrants of companies in airfreight, buses and rail shaving top logistic service providers might inhibit the chances of China Airlines cargo achievements. Additionally, high employee turnover in the company poses threat to the company ability to position itself. PEST ANALYSIS Political China airlines cargo operates in a highly regulated political environment. The political policies of a country towards airlines such as regulating price while restricting new entrants, or issuing more independence impacts the success of airline companies. As such, China airline cargo can easily achieve its success through operating in more countries that have deregulation, open skies and independence policies. Additionally, focusing on the political stability of countries is an added advantage. Economic The current global economic growth generates enormous opportunity for China Airline cargo. The benefits of economy growth results to high goods-flow hence the capability to improve the industry profitability. Additionally, increasingly globalization poses positivism due to free movement of goods. Contrarily, economic stagnation poses negative outcomes such as restrict travels and much lower fares. As such China Airlines cargo need to strategize on how to reduce investment during economic weaker periods to prevent loses. Social An increase in consumer class implies consumers demanding for good terms and services from a company. As such, airline industries have to come up with better terms and services so as to win the heart of consumers. Additionally, the consumer profile is changing whereby the clients are economically minded while selecting companies. Therefore, China Airlines cargo needs to apply new strategy that is fair based on the country social position. Technology The intense competition in the airline industry requires airline companies to adapt to the latest communication systems and equipment. As such, the China cargo airline will have the ability to survive in the current operating environment and newer environment. Additionally, equipping the latest technology would lower the company fuel consumption, airline operations and improving on efficiency hence attaining much more profits and ability to re-position in market industry. Resource Based View Theory Resource based theory focuses on competitive advantage and the company profitability. Basically, the theory works best after identifying firm’s identity and purpose. As such, the RBV theory emphasizes on the firm available resources as the core asset of the company competitive advantage and organization functionality through conducting an analysis (Bridoux 2014). The resource based theory best suits the airline to realize its achievements. The resource based view theory focuses attractiveness of the industry through branding hence a competitive advantage. The theory further pinpoints that the organization economies form the primary basis for its profitability (Angelez 2015). As such, through the analysis, the China airline Cargo economies will have an impact in the new level of profitability. Further conducted research indicates that the differences in profitability within companies operating in same industry are much more important than the differences in the type of industry (Irina 2013). List of References Ahmed, M 2013, ‘SWOT Analysis for Air China Cargo Performance and its Outcome with in Services,’ an International Journal, vol. 13, no. 1/2, p. 2. Angelez, M 2015, ‘Organizational Capabilities and Profitability: The Mediating Role of Business Strategy,’ Journal of Sage Open, pp. 1-13. Aircargonews 2016, ‘Air China Cargo Sees Yields Tumble in 2015’. ATKEARNEY 2015, ‘China 2015: Airfreight and Logistics Strategies,’ Leadership based on Improvement, Diversification and Redesigned Networks. pp. 5-6. Bridoux, F 2014, ‘A Resource-Based Theory towards Organization Performance and Competition,’ an Analysis of the Relationships between Resources and Competition. p.3. CAPA 2013, ‘China Airlines Cargo Responds to Intensive Changes in Taiwan-foreign LCCs Competitors are on the Rise’. Chiu, J 2014, ‘China Airlines Cargo Reduced Profits by 32% based on Competition, Weak Cargo Demand,’ The Wall Street Journal. Erraitab, E 2016, ‘A Co integration Study of Air Travel Demand: The Findings of International Air Travel,’ IJTTE, vol. 6, no. 1, pp. 104-120. Feizi, M 2013, ‘Evacuation the Effect of Information Technology on Competitive Advantage in Industries,’ AJBMR, vol. 3, no. 1, pp. 50-53. Gilaninia, S 2013, ‘The Characteristics between Organizational Trainings on Competitive Strategy and its Outcome on the Performance of Business Revenues and Customer Satisfaction,’ AJBMR, vol. 1, no. 3, pp.54-56. Hamanaka, S 2013, ‘Services Business Partnership in Asia: Comparison between Europe Continent and North America Continent,’ Journal of the Asia Pacific Economy, vol. 19, no. 1, pp. 137-150. 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