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MGMT4210 Corporate Strategy (Spring 2016)Session L3 Group 7 - Final ReportCompany: Cathay Pacific AirwaysGroup MembersChan, Ka Wing 20121599 Saarela, Henri Ville Lars20364658Leung, Lee On 20111013 Tsang, Cheuk Fung Herman20123535Chan, Siu Wai 20122696 Cheung, For Lee 20123107Introduction: Cathay PacificFounded in 1946, Cathay Pacific is an international airline registered and based in Hong Kong. Benefited from the “one route, one airline” policy in the 1980s1, Cathay Pacific has been dominating the international routes market in Hong Kong while its associated company, Dragonair, focused on routes to the Mainland China. In 2006, Dragonair became a wholly owned subsidiary under Cathay Pacific. This further strengthens Cathay Pacific’s presence in the Asia-Pacific region.With its strong presence and reputation, Cathay Pacific has been rated as one of the top 10 airlines companies inthe world2. In 2015, it offers scheduled flight services to 179 destinations in 43 countries3. In 2014, the market value of Asia-Pacific’s airline industry is USD$188.46 billion4and Cathay Pacific alone accounts for 7.25%.Industry AnalysisAccording to the Global Airlines Industry Profile5, the global airline industry experienced strong growth during 2010-2014 due to increase in passenger volume and rising airfares. The compound annual growth rate is 7.6%. Among all the market, Asia-Pacific market experienced the strongest growth with a compound annual growth rate of 9.3%, and it is the second largest market with a market share of 32.2% (USD $188.46 billion). The second strongest growth potential market is European market, which has a 7% of compound annual growth rate from 2010-2014, and it is the third largest market with a quarter of global market share (USD $146.74 billion). Five forces modelThreat of new entrantsThe threat of entry indicates the extent to which new firms can enter the industry, which is affected by 6 factors,i.e. economies of scale, network effect, switching cost, capital requirement, intangible asset, and credible threat of retaliation.The threat of entry is low. The capital requirement of the airline industry is high. Aircraft and related equipmentaccounts for 52% of assets of Cathay Pacific6, which is around HKD $89870.04 million. Alone in 2015, the 1The economist. (2002). Aviation in Greater China: New Opportunities, and Bigger threats for Cathay Pacific. Retrieved 28 April, 2016, from 2Skytrax. (2015). 2015 Top 10 Airlines, Retrieved 28 April, 2016, from -airlines/3Cathay Pacific. (2015). 2015 Annual Report. Retrieved 28 April, 2016, from -en.pdf4Airlines Industry Profile: Asia-Pacific (2015), Airlines Industry Profile: Asia-Pacific, 1-415Global Airlines Industry Profile (2015), Airlines Industry Profile: Global, 1-426Cathay pacific . (2015). 2015 Annual Report. Retrieved 28 April, 2016, from -
value of aircraft and related equipment increases by HKD$10489 million. Without strong financial resources, it