Operations and Process Management at Cathay Pacific Airline - Case Study Example

Operations and Process Management at Cathay Pacific Airline By: Professor: Class: University: City: State: Date of submission: Table of Contents Table of Contents 2 Introduction 3 Analysis of the operations 4 The nature of the transformation process 4 The impact of the ‘4Vs’ 4 The types of operating process 6 Supply chain management 6 The use of information technology to support the operations 7 The application of TQM principles 8 The use of human resources within the operations function 9 Major strengths and weaknesses of the operation 10 Strengths 10 Weaknesses 11 Recommendations for improving the operations function and Strategy 12 References 14 Operations and Process Management at Cathay Pacific Airline Introduction Cathay Pacific is a registered international airline based in Hong Kong and offers variety of services including the scheduled passenger and cargo flight services to 162 destinations in 142 countries and territories. Through the years, there have been high level of competition that the airline had to improve its operations and processes to enhance the quality, efficiency, and effectiveness of the services offered to the potential customers. As the major airline in Hong Kong, Cathay Pacific play important role in providing links to trade, investments in business opportunities and leisure travel. Through the company’s passenger and cargo services within the Cathay Pacific Dragonair and Air Hong Kong, the airline connects Hong Kong to various parts of the world. The airline is proud of its heritage (Cathay Pacific, 2016). Founded in 1946, the airline has been able to grow along with the Hong Kong sharing both the setbacks and triumphs over the past six decades. Moreover, the airline thrives in the strategy of offering premium-quality service package through focusing on critical factors to the customers: safety, schedule, and network for supporting the passengers, customer services, and the cargo transport requirements of the people within the airline industry. Currently, the airline and associated subsidiaries offer employment to 29,000 people globally. Throughout the years, the airline has been able to acquire competitive advantage based on improved operations and process management (McFarlan, Lo & Young, 2007, 192). To achieve such advantage, the airline diversified its operations to include aircraft fleet, airline services, ground handling, and catering. It is from such background that the report aims to analyze the various contributing to operations and process management of Cathay Pacific. Analysis of the operations The nature of the transformation process The transformation process involves the activity or groups of activities which one or inputs, transforms, add value, and provide outputs that satisfy the needs of the customers. Within Cathay Pacific, the inputs are information and people which makes the transformation to require adequate analysis. The transformation processes within the company include changing the location of the materials, customers, and customers. The airline uses internet as its distribution channel, which offer the customers the opportunity to book their flights online. Through alliance with various travelling agencies, the passengers have ample time of planning their trips in a more flexible manner considering that the members tend to offer a wider variety of schedules, routes, and destinations (Cento, 2009, 108). On the other hand, the airline uses it partnership deals in effectively managing its customer base. In 2010, the airline signed a long term Content Agreement with Amadeus to ensure that there is adequate accessibility to various agents to enhance its performance, fares, and schedule availability considering that Amadeus is a renowned technology partner and transaction processor. With continued growth and increment in operations, the airline has been investing to explore various market segments through market penetration and investing in different countries. These activities aim to take the airline services close the customers and improve their loyalty to the company. The impact of the ‘4Vs’ There are four features of demand, which are of significant effect on the manner in which organizational processes need to be managed. The airline tends to have various operations through which it transforms input resources into the output products and services that meet the needs of the potential customers; nonetheless, their features tend to vary and grouped in four output principles: volume, variation, variety, and visibility generally referred to as the 4Vs. From the analysis, it is clear that Cathay Pacific offer various services to the customers. The airline has high volumes based on its number of flights, size of the fleet, and competitive prices. With increasing demand within the airline industry and ever-changing needs of the customers, Cathay Pacific has been focusing on diversifying the services that it offers to the potential customers (Delfmann, 2005, 188). These services range from passenger and cargo flights to catering services through partnership with other businesses. With its volumes and minimal costs of its services, the airline enjoys benefits from the economies of scale despite the low prices. On the other hand, variety of the airline is high. Since the airline introduced its charter division, there have been improvements in its premium customer travel experience. The airline customers can book their tickets online which offers efficient and reliable services. Regular Cathay Pacific Airline flights offer variety of options of the business including the First class and Economy. Moreover, the entertainment system within the economy class is rated as very high (Captains, 2004, 122). Cathay Pacific provides continental transportation with various add-on services. In terms of variation, the demand on the higher side is associated with the oil prices and seasonality. The company thrives in different seasons. Variety within the company refers to the range of services that the airline offers. The airline boasts of high visibility; however, with its business model, it does not establish clear channels of communication with part of the travel services not visible to the potential customers. Through investing in various services, the airline has been able to increase its market visibility, which has contributed to its competitive advantage significantly. The types of operating process In terms of selected process types, the airline company operates largely in the massive services that touch on the specific needs of the customers. The aim of the processes used is to maximize on the margins. Throughout the years of growth, Cathay Pacific aim to achieve its competitive advantage through delivering quality services and integration of the ever-changing needs of the customers; as a result, it focuses on standardization of its services. Moreover, the executive division of the airline operates more service shops due to higher level of flexibility and higher costs often covered through the premium prices (Cathay Pacific Airways Ltd, 2001, 119). The airline’s process involves continuous flow process aided through automation of various activities such as booking the flights, cancellation, and making follow-ups of the booking process. Important processes within the airline activities such as the command centres operate on 24/7 basis to ensure efficient and effective offering of services to the potential customers. Due to the international nature of the airline, Cathay Pacific also operates on flow lines basis, which involves the processes that consist of essentially independent stations offering similar services. Supply chain management In 2007, the global economy experienced downturn, which greatly impacted the aviation industry especially the air traffic. While the airlines were struggling with reduced profits, the operations became complicated that affected event Cathay Pacific airline. However, in 2012, the airline launched its commitment under its Sustainable Development Stratey, which requires various parties to work with its supply chain. Cathay recognizes its suppliers and integrates them in various sustainable development principles and practices, which ensures higher level of overall sustainability performance (Cathay Pacific, 2013). Moreover, the company aims to improve its sustainability performance of its supply chain through its Supplier Code of Conduct and continued collaboration and engagement with the suppliers. Cathay Pacific manages its sustainable development risks through working actively with the suppliers sharing the standards it places on the environmental health and safety, human rights and labour practices, and focusing on business ethics and community issues through corporate social responsibility. The company also engages the suppliers of in-flight sales products on the sustainability principles with an aim of expanding its reach of its Supplier Code of Conduct. The engagement is to ensure consistency in the services and sustainability requirement of the services that meet the needs of the customers. The use of information technology to support the operations The Cathay Pacific Airline offers innovations within its technological aspects and introduced new concepts to allow it perform competitively within the airline industry. With the rapid changes in technology, the airline is making sure that it updates its services to things that are happening and adjust to such changes. Moreover, the company also provides services that constantly updated in conjunction to the latest technological standard of tendering its services (Lessem & Schieffer, 2009, 156). With increased competition within the aviation industry, Cathay Pacific had to upgrade its engineering system infrastructure with an aim of meeting the demand for more processing power and effective management of data while rolling its final phase of the Ultramain implementation. As a result, the airline purchased an IBM eServer p690 and p630 with an aim of providing RAS capabilities while safely storing the valuable bit of information on a high-availability SAN solution. Moreover, the business is moving towards the state-of-art technologies in business intelligence, customer relationship management, ecommerce, and supply chain management. With the changing needs of the customers, efficiency and reliability in communication is becoming vital; as a result, Cathay Pacific managed to upgrade its booking system to online platform that allows customers to book for various services including flight based on their convenience (Transportation Safety Board of Canada, 2005, 129). Moreover, the company leverages its competitive advantage through integration of high technology in its products and services to explore numerous opportunities for growth in the application development, technology architecture, mobile development, and business analysis. With more than 400 applications that support its diversified functions that range from the engineering and flight operations in checking-in the supply chain, Cathay Pacific boasts of the most fascinating information technology environment within Hong Kong. The application of TQM principles In the total quality environment, the major quality determinants are customers and employees responsible for its production. Therefore, the quality of the service depends on the perception of the customers and the extent to which the services meet the expectations. Based on the six-sigma method, the process is a standard and philosophy meant for satisfaction of customers (Meehan, 2016). To ensure that it delivers quality services to the customers, the company often undertake interviews and customer surveys on yearly basis. In such practices, the customers are invited to participate in the Cathay Pacific Voice of the Customer Survey with an aim of determining the level of satisfaction of the customers and areas that require improvement. With the survey result, the airline develops plan to act on the suggestions, enhancing the solutions, and the experiences that the customers receive from the company. The company also has various quality programmes. Cathay Pacific managed to implement preventative measures of guarding against the spread of Severe Acute Respiratory Syndrome (SARS) within the airport that it serves in provision of the in-flight service associated to the ground and in-flight personnel. In every business, there is need for continuous improvements of keeping the survival in the business environment (O'Connell & Williams, 2011, 172). Through its Quality Function Deployment (QFD), the company is able to focus on continual improvements that aim to bring the customers into the design services. The approach translates what the customers need into what the airline provides. Moreover, the airline complies with several health and safety measures to protect the workers. These measures include wearing surgical masks and latex gloves each time that work is undertaken on the aircraft; check-in staff that provide passenger service at the airport in affected countries need to wear surgical masks while providing the provisions. The use of human resources within the operations function Cathay Pacific recognizes that the employees are important in the achievement of its sustainable goals. Therefore, people are at the heart of the airline. With more than 22,000 employees based in its Hong Kong family and spread across the globe, the challenges and opportunities that the company offers to employees are endless. After determining the need for the human resources, it is important to recruit the employee who understand the business dynamics and shared the needs of meeting the organizational goals through adequate satisfaction of the customers (Peoples, 2012, 164). At Cathay Pacific, the management focus on hiring the most qualified employees through focusing on both their talents but also view them as the employer of choice with the strong value of proposition (Cathay Pacific, 2016). Identification of the right skills tends to necessitate knowing both the current culture, organizational structure, and most significantly the future of the organization. Throughout the years, the company has focused on ensuring high level of productivity through retention of the best performing employees. Within the labour pool, there are many employee potential workers but they lack the desired skills to fulfil organizational needs. As a result, Cathay Pacific often focuses on training its selected employee and retains them for efficient and reliable employee-employer relationship. Major strengths and weaknesses of the operation To achieve the desired competitive advantage, the business should be in a position of leveraging it weaknesses with the strengths. With stiffer competition within the aviation industry, various companies have been able to develop various strategies to counter the methods used by other business entities. Strengths Business strengths play important role in determining the opportunities that business needs to invest in with an aim of confronting the future. The major strength of the company is the fleet which allows to maintain its marketing performance that ensure adequate provision of both cargo and passenger flights to the customers on regular basis. Moreover, the business possesses large fleet of modern aircraft such as Airbus and Boeing, which are the major brands globally, and contributes to the higher level of reliability and safety of the flights that the company provides (Hüschelrath & Mueller, 2012, 142). Besides, the cases associated with repair are rare while the maintenance costs of the new aircrafts remain relatively low compared to the old ones. The company also boasts of experienced and well-qualified human resources, which also comprises of its marketing value. It is important to note that human resources play important roles in the competitive struggle since they have the ability of boosting organizational development. In Cathay Pacific, human resources have been able to improve performance and introduce innovations that boost business development. Besides, human resources have the ability of accelerating the business development since they can improve their performance even without the business making any financial investment (Kotler & Keller, 2009, 173). Moreover, the technology used within the company is one of the greatest within the global aviation industry. With these strengths, the business could improve its competitive position and marketing performance. The company’s brand is one of the main marketing assets. Such reputable and renowned brand contributes significant to the organizational objective of penetrating the aviation industry and improving its current position within the market. In such methods, Cathay Pacific could its marketing position and fully exploit its brand. Currently, customers tend to choose businesses that serve their specific needs, which they base on the ground on brand and reputation. Weaknesses Even though the business has numerous strengths, it has weaknesses that the major competitors could use in outshining it. These weaknesses tend to affect the market performance. Firstly, it is important to note that the company is located in Hong Kong, and despite the historical impact from the western countries on the organizational culture, Cathay Pacific has remained oriental with its cultural norms and traditions that majorly affects its structure and relations with various entities (Eaton, 2016). Besides, organizational cultural background might be a weakness unless the globalization process and international expansion of the market raising the problem associated the diversity of culture; Cathay Pacific has to deal with such issues. As the airline enters new markets, it is important that it operate a multicultural environment. Hence, the airline has to adapt to the new management styles that incorporate various cultural norms and traditions of the workers. In such instances, the risk associated with misunderstanding and conflicts that occurs between people representing various culture increases which makes it significant for the company to elaborate an effective methodology of successfully and effectively managing the multicultural environment. In addition, the airline also needs to renew and expand its fleet. As the operations and processes of the company increase, it is vital that it purchases new aircrafts. Nonetheless, these activities require adequate funds, which might be costly to the business. In such cases, there are high chances that the Cathay Pacific might experience the problem of inadequate funds for the renewal policies (Ferreri, 2003, 22). Consequently, if it fails to purchase the new aircrafts, the airline might face several challenges associated with deterioration in the quality of services provided and shortage in the services that could provide services to the customers. Other problems associated with inadequate aircrafts are flight delays and late delivery of both the passengers and cargo. Therefore, the company could experience increment in the growing level of customer dissatisfaction. Recommendations for improving the operations function and Strategy Cathay Pacific Airline majorly operates in Hong Kong where its headquarter is located and has the objective of offering superior services. The airline differentiates its brand from the competitors through passionate staff, services, and offers promotional activities including Meeting, Incentive, Convention, and Exhibition (MICE) and PA that targets more profitable business travellers segment. With the existing institutional loyalty programme, the Cathay Pacific aims at improving its profitability through customer satisfaction and loyalty. Through deep cultivation of the long-term relationship with the partners is another method used to acquire the desired competitive advantage. Currently, Cathay Pacific majorly focuses on the promotion of its products within Asia. However, it needs to consider the emerging markets in other countries to create the high level of awareness due to rising availability and influx of tourism across the various continents. Such expansion would assist in capturing the share of large markets. In the previous years, the airline experienced negative forms of publicity; nonetheless, the institution is currently focusing on building positive publicity through developing a competitive advantage and ensuring an increment in the customer base. Even though the company experiences several weaknesses, it has several opportunities that it could develop in its advantage. Through improving its marketing position, the airline could eliminate its weaknesses. Consequently, implementation of effective marketing strategy could assist in the realization of the company’s full potential and utilization of the available opportunities. With such opportunities, the airline could take the leading position globally. In Asia Pacific region, the airline holds the leading position; therefore, expanding business activities and operations in various market segments might not present great challenges (Barrett, 2001, 191). The region is also the major market for the airline but since it operates internationally and offer flights to various destinations, it is important that it increases its presence within European and American markets with an aim of challenging the market position of the current leaders within the airline industry. References Barrett, S. D. (2001). Market entry to the full-service airline market — a case study from the deregulated European aviation sector. Journal of Air Transport Management, 7(3), 189-193. Captains, X. Y. (2004). Preparing for your Cathay Pacific interview: The pilots guide. Canada: Pilot Careers International. Cathay Pacific. (2016). Sales & Marketing Positions | Careers - Cathay Pacific. 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