Introduction
Background Information
Cathay Pacific Airways is a world-leading airline carrier and is the flag carrier of Hong Kong. Although the airline’s main hub is at the Hong Kong International Airport, their head office is located on the 33rd Floor, One Pacific Place, 88 Queensway, Hong Kong (Cathay Pacific, 2011). Founded 65 years ago, the airline has a large fleet of wide body aircraft that transports its customers to the major destinations in the world. Its target destinations are Bangkok (Thailand) and Taipei (Taiwan).
As a major airline, Cathay Pacific deals directly with people travelling either for business or for pleasure. This means one of the main catalysts of its success is how it relates to its clients. Most modern businesses today place good customer care as one of their core values. Treating customers well helps a business to develop and maintain a good customer base, their main source of income.
With most the world’s economies not doing so well in the current economic environment, airlines have struggled to maintain the profit margins they were enjoying prior to the global economic crisis of 2008. Reduced air travel and increasing competition has forced airlines like Cathay Pacific to improve basic customer care relations. Most airlines have dedicated entire departments and have based their entire marketing strategy upon their ability to provide good services to customers. Cathay Pacific’s slogan, for example, reads ‘Now, you are really flying’. This gives the impression to customers that it’s only by flying with Cathay Pacific that they experience the ultimate flying experience.
Taking a market-oriented adopts a business strategy based on the needs and wants of customers. The market-oriented approach is in direct contrast to the production orientation, where a firm’s activities are geared towards existing technologies, products and production processes (Gronroos, 2006).
The American Marketing Association defines marketing as ‘the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchange and satisfy individual and organizational objectives. ‘ (Gronroos, 2006). As an airline, Cathay Pacific competes against airlines with international appeal, experience in customer care and companies that have large operating capital.
Most international airlines will try as much as possible to enter the Hong Kong market, largely because Hong Kong is a leading international business hub and a window into a region that has some of the highest population densities in the world.
The economic downturn of 2008 left most of the world’s leading airlines in need of customers. Selling services is much harder than selling physical goods, and the perception that a customer has of your services is what really sells the product. In the case of Cathay Pacific, how they packaged their services had to be a delicate balance of price, quality and customer satisfaction. In addition, the customer perception of the service industry all over the world was at its strongest point. Polls showed that perception of most service industries was quite low before the recession. In the United States, for example, the service industry was rated at a mere 69.4% (Oliva & Sterman, 2009).
I have decided to conduct a study in this because I want to address three keys issues. First, I would like to take a look at the service industry as a whole and the key elements that drive it. Secondly, I would like to examine how airlines around the globe operate, particularly when it comes to how they deal with their clients. Finally, having examined these two other elements, I will examine how customer relations in Cathay Pacific have affected their business performance, and how they have based their business strategy on customer satisfaction and excellent service provision.
An examination of the service industry gives a contextual background to the issues to be further discussed in the paper. It is with a proper understanding of the service industry that a comprehensive study of the airline industry and Cathay Pacific in general, can be carried out. It is also important to study the service industry as a whole because the concepts that promote growth – and decline – in the sector as a whole affect the airline industry just as they affect other service industries. It is important to note that the key element to be studied will be customer relations and how they affect businesses in the service industry.
Studying the airline industry is important because it gives the reader a better understanding of how the industry is structured, how it works, and the important elements that promote its success and how customer relations in the industry have changed over the last couple of decades. I shall discuss how businesses have switched their focus from raising their profit margins by implementing cut-throat policies to taking a customer-friendly approach to business.
Customer relations involve how business people interact with their clients as they provide their services. At the end of the day, businesses all over the world are focused only on their bottom lines. Modern businesses have discovered that it is cheaper to keep existing customers than to keep new ones. This means that most businesses today focus on how they relate to their current customers just as much as they pay attention to expanding their customer base.
Statement of Purpose
The purpose of this research is to discuss how good customer relations in the airline industry benefit the growth of the business. The discussion will use Cathay Pacific, the national carrier of Hong Kong, as a case study.
Aims and Objectives
This research aims at achieving two things. First, it aims developing a basic but dynamic understanding of the business environment within the service industry with focus being in the airline industry. Secondly, it aims to examine the role that good customer relations within the airline industry play in boosting business growth within the sector.
In order to achieve the aims of the study, the following objectives will be met.
Give an overview of the important factors that affect growth of businesses in the service industry. Particular attention will be paid to the role of customer care relations.
Provide a detailed view of the airline industry, taking particular interest in a comparison between modern business practices and older business practices in the industry.
Examine how customer relations have changed in the airline industry within the last ten years, taking particular interest in how Cathay Pacific has changed its approach to treating customers in order to keep up with competition from rivals from the Asia-Pacific region and from the entire world.
Research Questions
How vital is it for businesses in the service industry to maintain good customer relations in regards to improving their profit margins.
In what ways have airlines improved how they relate to their customers in an effort to remain competitive in the current business environment.
Is the future of success in businesses going to be based on customer satisfaction, on developing proper infrastructure and technologies to make business more efficient or a combination of the two.
Literature Review
According to the Encyclopaedia of Business (2011), customer relations involve the promotion of customer loyalty and satisfaction. In a more basic sense, it involves the management of communication channels between the business and the clients, resolving issues that customers have amicably and answering customer complains and questions. Customers have become an extremely important paradigm in modern business, and today many businesses have what they refer to as ‘internal’ and ‘external’ customers.
Inside customers refer to those people within the organization that require the services of another unit within the organization and therefore need to relate to them positively. The encyclopaedia also points out that maintaining good customer relations among businesses developed in the late 20th century. The focus of most businesses today is improvement of good customer relations.
Cameron (2000) has carried out a research that examines how customer care agents in businesses are getting trained to communicate clearly and correctly with the business clients. In her research paper, she examines how most corporations are adopting a standard way of speaking to and relating to customers. A semi-official business communication language is developing, where customer relations agents communicate with their clients in pleasant and acceptable ways.
These agents are taught how to speak clearly, slowly and in an articulate manner, while at the same time coming off as friendly. By doing so, clients feel comfortable and get the sense that they are receiving good quality service from the company. Cameron states that “although they may vary in their ability to bring it off, service workers performing standard routines are typically instructed to aim for the ‘natural’ and ‘authentic’ performance” She goes further to explain that standardizing speech is done through improving efficiency, adopting calculability, improving their sense of predictability of customer needs and learning to control technology.
Gilbert and Wong (2003) undertook a study to determine which service dimensions mattered most to airline passengers at the time. The main objective of their study is to wouldemonstrate how an airline can utilize a measure of different passengers’ expectations as a diagnostic tool in managing its service quality’. They collected data from the Hong Kong International Airport, the operating base of Cathay Pacific.
The main dimensions they took into account were reliability, assurance, employees, facilities, flight patterns, customization and responsiveness. Among all the passengers they interviewed, they found that the highest percentage considered assurance to be their main concern. They go further to explain that the main source of their concern was the 2001 Twin Tower disaster that sent shockwaves across the globe. They needed assurance from airlines therefore that they could travel safely and have their concerns addressed whenever they felt any sense of danger. For companies to best address these issues, the authors feel that maintaining good customer relations is not only good, it is vital for the survival of an airline.
Although most interviewees for the research were travelling for different purposes, the fact that they all consistently ranked assurance as their first and fundamental concern speaks volumes by itself. Gilbert and Wong write ‘in the airline industry understanding what passengers expect is essential to providing desired service quality. ‘
Kemp and Dwyer (2003) conducted a research to examine how mission statements of airlines reflect how they relate to their clients. This paper takes a look into mission statements from around 50 airline website for analysis. The paper then looks at how idyllic they are so that they could be applied within administration of tourism and hospitality organizations. In their research, they point out that Cathay Airways, much as it is a leading airline in their regions, are not as customer oriented as their competitors.
They point out that the main objective of Cathay Pacific is to provide increase their profit margins. In their concern for survival, Cathay Pacific state that their main criteria is developing superior financial returns’. Their concern for employees is ‘providing rewarding career opportunities’. Compared to other airlines like British Airways, China Airlines, EasyJet and American Airlines, Cathay still has ground to cover. However, their vision reads
“Our vision is to make Cathay Pacific the most admired airline in the world. Ensuring safety comes first. Providing service straight from the heart. Encouraging product leadership. Delivering superior financial returns. Providing rewarding career opportunities”
Further literature reviewed is Johnson’s ‘An integrative taxonomy of intellectual capital’ (1999) and Stewart’s ‘A satisfied customer is not enough’ (1997).
Methodology
This study uses a qualitative analysis to collect, analyse and present the data. This method is chosen over the qualitative method because if data is to be collected and analysed using the qualitative means, a true sense of issue discussed will not be discovered. This research paper will be divided into six chapters: Introduction, Literature Review, Methodology, Results, Discussion of Results and Conclusion. It will also have an appendix, a bibliography and a table of contents, with the latter appearing at the beginning of the document.
This research paper is structured as a case study. The first step of the study is to determine the research questions. In this case, the research questions are:
How vital is it for businesses in the service industry to maintain good customer relations in regards to improving their profit margins.
In what ways have airlines improved how they relate to their customers in an effort to remain competitive in the current business environment?
Is the future of success in businesses going to be based on customer satisfaction, on developing proper infrastructure and technologies to make business more efficient or a combination of the two?
The next step is picking the case study. In my case, I choose to study Cathay Pacific, Hong Kong’s national carrier and one of the leading airlines in the Asia-Pacific region. Once the data is collected, I will analyse the data and prepare a report. Generate project strategies that make sure make inputs into design. Achieve the project’s business goals and objectives within the scope and budget. Minimize risks that could impact on operations of the business. Finally come up with a constructive and protected agreement between the department and selected vendor/buyers.
References
Cameron, D., 2000. Styling the worker: Gender and the commodification of language in the globalized service economy. Journal of Sociolinguistics, 4(3), pp.323-47.
Cathay Pacific, 2011. Hong Kong. Web.
Gilbert, D. & Wong, D., 2003. Passenger expectations and airline services: a Hong Kong based study. Tourism Management, 23, p.519-532.
Gronroos, C., 2006. Definint Marketing: A Market Oriented Approach. European Journal of Marketing, 23(1), p.52.
GSLIS, 1997. The Case Study as a Research Method. Web.
Johnson, W., 1999. An Integrative Taxonomy of Intellectual Capital. Technology Management, 18(5), pp. 562-75.
Kemp, S. & Dwyer, L., 2003. Mission statements of international airlines: a content analysis. Tourism Management, 24, p.635-653.
Oliva, R. & Sterman, J.D., 2009. Cutting Corners and Working Overtime: Quality Erosion in the Service Industry. Management Science, 47(7), pp.894-914.
Stewart, T., 1997. A Satisfied Customer is not Enough. Fortune, 136(2), pp.112-13.
The Business Encyclopedia, 2011. Customer Relations. Web.