Environmental Forces for Cathay Pacific

Environmental Forces:

Environmental forces are something that is intangible but somehow it still affects your firmÐŽ¦s operation. Therefore, these environmental forces can be divided into groups such as internal and external forces. In the Cathay Pacific Airway case, the internal forces can be considered as its human resource management, since the labor cost is its main concern. In addition, government policies, competitors and customer satisfaction will be considered as its external forces.

Internal forces:

Cathay Pacific is currently paying extremely high salaries to its employees. This situation not only causing Cathay Pacific to lose profits but also become one of their disadvantage. According to the research, Cathay Pacific has been known as the highest salary paid Airline Company. In other words, there is no doubt why Cathay Pacific cannot raise their profit margin. Cathay Pacific really has to work on their human resource management in order to cut down their labor expenses to increase the profit. By comparing the numbers on wages, passenger carried and revenue from other two main competitors (Singapore and Malaysia Airline), we found out that Cathay Pacific has served almost double amount of passengers than Singapore Airline on year 2005 but only received half of what Singapore Airline made on its revenue. This result shows us that a high labor expense is damaging the companyÐŽ¦s operation. Therefore, Cathay Pacific really has to work on its human resource management in order to lower their expenses on labor.

External Forces:

Government policies are the most common external forces for international airline companies. Since the aircraft

are not only traveling within nation, international airline companies now need permissions from other countries so they can land on their airport and somehow this can be very uncertain. Getting a permission from other countries are not as simple as come and go. There are so many things to be considered before they give you the authority such as the relationship between the two countries you are traveling. Moreover, for international airline company to expend their routes they also need the deal with the local government and this sometimes can be rejected. For all international trading company, the government regulations will always be the very first thing to be considered.

Competitors are another part of external forces. Since Cathay Pacific is not the only one international airline company in Asia, they now have to deal with the market more carefully. Cathay pacific has to start looking into the market and see what others are doing in order to be more competitive. For example, Cathay charges higher flight rate than its competitors due to its high labor cost. If Cathay continues to set it flight rate in the top zone, it will automatically benefit those airlines that set a lower flight rate. Therefore, Cathay Pacific really has to come up with some solutions in order to stay competitively.

Customer satisfaction is the most important external force, since here is where the money comes from. Within the service market, Cathay really has to focus on its customer satisfaction otherwise customers are just going to walk away from them. According to one of the marketing theory, one dissatisfy or satisfy customer can at lease effect ten others customers. Imaging if you dissatisfy ten customers each flight, you are actually going to lose hundred and this is not a small number. Customer satisfaction is something that Cathay Pacific really has to look into.

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One of the problem that we have found from the research is Cathay Pacific is currently facing an extremely high labor expenses each year. Cathay paid their pilots and flight attendants both above the market average. The reason they did this has something to do with the strike they had back in 1993. Cathay Pacific tripled the wages for those who sated after the strike and after these years those employees who sated after the strike are still receiving the high pay. In order to cut down the salary expenses, Cathay can start producing its own plots and flight attendants