Explores the various aspects of information technology that can be outsourced. Cathay Pacific outsourced a significant part of its vital operations from Hong Kong to Sydney, Australia. A rewritten version from an earlier case.
Authors :: F. Warren McFarlan, Fred Young, Lo Waishun
Swot Analysis of "Cathay Pacific" written by F. Warren McFarlan, Fred Young, Lo Waishun includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Cathay Outsourced facing as an external strategic factors. Some of the topics covered in Cathay Pacific case study are - Strategic Management Strategies, IT, Operations management and Technology & Operations.
Some of the macro environment factors that can be used to understand the Cathay Pacific casestudy better are - – central banks are concerned over increasing inflation, there is backlash against globalization, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China,
talent flight as more people leaving formal jobs, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Cathay Pacific case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Cathay Outsourced, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Cathay Outsourced operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Cathay Pacific can be done for the following purposes –
1. Strategic planning using facts provided in Cathay Pacific case study
2. Improving business portfolio management of Cathay Outsourced
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Cathay Outsourced
Strengths Cathay Pacific | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Cathay Outsourced in Cathay Pacific Harvard Business Review case study are -
Learning organization
- Cathay Outsourced is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Cathay Outsourced is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Cathay Pacific Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Cathay Outsourced are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Low bargaining power of suppliers
– Suppliers of Cathay Outsourced in the sector have low bargaining power. Cathay Pacific has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Cathay Outsourced to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Cathay Outsourced is one of the leading recruiters in the industry. Managers in the Cathay Pacific are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– Cathay Outsourced has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Cathay Outsourced has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
High switching costs
– The high switching costs that Cathay Outsourced has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Operational resilience
– The operational resilience strategy in the Cathay Pacific Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Sustainable margins compare to other players in Technology & Operations industry
– Cathay Pacific firm has clearly differentiated products in the market place. This has enabled Cathay Outsourced to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Cathay Outsourced to invest into research and development (R&D) and innovation.
Training and development
– Cathay Outsourced has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Cathay Pacific Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Strong track record of project management
– Cathay Outsourced is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Cathay Outsourced has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Cathay Pacific - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Cathay Outsourced has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Cathay Pacific HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Cathay Pacific | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Cathay Pacific are -
Workers concerns about automation
– As automation is fast increasing in the segment, Cathay Outsourced needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Cathay Pacific, is just above the industry average. Cathay Outsourced needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Increasing silos among functional specialists
– The organizational structure of Cathay Outsourced is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Cathay Outsourced needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Cathay Outsourced to focus more on services rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Cathay Pacific, in the dynamic environment Cathay Outsourced has struggled to respond to the nimble upstart competition. Cathay Outsourced has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Cathay Outsourced has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Cathay Pacific, it seems that the employees of Cathay Outsourced don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Aligning sales with marketing
– It come across in the case study Cathay Pacific that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Cathay Pacific can leverage the sales team experience to cultivate customer relationships as Cathay Outsourced is planning to shift buying processes online.
Products dominated business model
– Even though Cathay Outsourced has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Cathay Pacific should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As Cathay Pacific HBR case study mentions - Cathay Outsourced takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Slow decision making process
– As mentioned earlier in the report, Cathay Outsourced has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Cathay Outsourced even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High operating costs
– Compare to the competitors, firm in the HBR case study Cathay Pacific has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Cathay Outsourced 's lucrative customers.
Opportunities Cathay Pacific | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Cathay Pacific are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Cathay Outsourced can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Cathay Outsourced to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Building a culture of innovation
– managers at Cathay Outsourced can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Technology & Operations segment.
Loyalty marketing
– Cathay Outsourced has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Cathay Outsourced to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Cathay Outsourced can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Cathay Outsourced can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Cathay Outsourced to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Cathay Outsourced to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Cathay Outsourced can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Manufacturing automation
– Cathay Outsourced can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Buying journey improvements
– Cathay Outsourced can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Cathay Pacific suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Better consumer reach
– The expansion of the 5G network will help Cathay Outsourced to increase its market reach. Cathay Outsourced will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Developing new processes and practices
– Cathay Outsourced can develop new processes and procedures in Technology & Operations industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Cathay Outsourced can use these opportunities to build new business models that can help the communities that Cathay Outsourced operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Threats Cathay Pacific External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Cathay Pacific are -
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Cathay Outsourced can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Cathay Outsourced can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Technology acceleration in Forth Industrial Revolution
– Cathay Outsourced has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Cathay Outsourced needs to keep up with the evolution of technology in the Technology & Operations sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Cathay Outsourced needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Cathay Outsourced high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Shortening product life cycle
– it is one of the major threat that Cathay Outsourced is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Cathay Outsourced in the Technology & Operations industry. The Technology & Operations industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Cathay Outsourced business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Cathay Pacific, Cathay Outsourced may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Cathay Outsourced in the Technology & Operations sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Cathay Outsourced can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Cathay Pacific .
Increasing wage structure of Cathay Outsourced
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Cathay Outsourced.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Cathay Outsourced with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Cathay Pacific Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Cathay Pacific needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Cathay Pacific is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Cathay Pacific is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Cathay Pacific is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Cathay Outsourced needs to make to build a sustainable competitive advantage.