Case Analysis: Cathay Pacific

Overview:
Cathay Pacific is a Honk Kong based airlines providing its services in a wide range of airlines
functionalities across nearly 200 destinations.
 Cathay Pacific is a company that has being to put to test many times, on wide ranges of
scenarios.
 The continue rise in the fuel prices is the core concerned for the airline as rise in the fuel
price is leading to decline in the company overall profitability.
 The company has always worked in isolation, trying its best to improve its IT integration
to keep itself ahead of its competitors, Cathay is a very well-integrated organization that
has created opportunities to support their own needs.
 The important issue in the case is the strategies that, ‘Yeung’ must apply for smart-
sourcing to ensure that the organization gets the best from all aspects.
Although, there had being a lot of in-house cutting-edge technologies developed by Cathay
which were fully functional and supportive for Cathay’s day-to-day’s functions, the deregulations
made in 1980’s created a lot of problems. Also, there had being an increased demand for
cutting down the operational cost by many new entrances which became very important for all
the airlines to stay in the business. The market was becoming very competitive and Cathay
must survive thus, it implemented the, “operation better shape” which helped them to review all
the potential areas of the organization which helped Cathay to recognize the areas where they
can cut cost. This was the time when they realized that outsourcing of its business functions
should be considered, which will help them to gain some additional benefits from outsourcing
firms while keeping their owns core competencies intact.
By the time of mid-nineties Cathay Pacific had already outsourced their Data Center to, “IBM”,
IT applications to, “Sabre Sirline Solutions” and its networks to, “SITA” through its coined term
“Smart sourcing”. While dealing with all the outsourcing activities, Cathay had also experienced
a lot of tough times in the business the biggest and the most difficult time in the history of
Cathay was the year 1998 as said by the chairman Peter Sutch, due to the problems as, the
Hong Kong government handover by British government to PRC brought a change in the local
government which eventually lead to the Asian economic crisis. Overall, in that year the
company estimated about $69 million deficit which was the first annual loss in the company’s 40
years of period.
After the crisis Cathay started outsourcing its Data centers, desktop, network, contracts, etc. As
Cheung, said outsourcing of the desktop was the most difficult part as desktop had two parts
hardware the assets of Cathay and software, which was licensed by Cathay, not IBM. The
Legacy systems were although retain by Cathay itself and not outsource Cathay maintained
these systems using its own in-house resources. But, somewhere down the line Cathay started
replacing its in-house legacy systems with some standardized packages like the “Walker
financial, a world-class financial software suite”. (Page 9)
In the beginning of 2000 Cathay issues with outsourcing led to internal demand in the business
to review the present IT landscape. In 2002 it was IM’s excellence lasting one year which led to
an improvement in IT stability, in 2003 IMFit was successful in decreasing both fixed and
variable costs for the company, after the, “SARS” impact on the business of Cathay for several
months in 2004, “EVOLVE” was being implemented, which helped Cathay reviewed it’s overall
IT strategy which led to more competitive vendor quotes for its day-to-day business and
services.

Cathay started looking for new opportunities in the market and in that time although all the
airlines markets were struggling hard around the world for business, China aviation industry was
growing at a faster pace. Cathay saw the opportunity and in 2002 it started its first flight to china
again since 1990’s as the Hong Kong government had transferred the rights to this route to
Dragonair, Cathay competitor. Cathay also started a lot of flights to different routes in China like
Beijing, Shanghai etc. Cathay was also lucky to negotiate the flight route between Taiwan and
China which was believed to incorporate a 10 to 15% of overall profit from the Taiwan route.
The company also invested in many Chinese Airlines companies like Air China and have the
plan to buy out its local competitor Dragonair.

Summary:

As said by Yeung, IM has not reached the final stage of its journey thus Cathay has still to
develop a lot of IT related values in its long, laborious journey. (Page 13) Which as per my
analysis could be achieved by:

 Outsourcing of all its IT functions

 By performing the functions of management level, like investment decision making,
governance or contract control in a very efficient way.

Case Analysis: RLK Media

Overview:
RLK Media is a US based high end audio video design selling company. The company has a
good reputation in the high-end consumer electronics market. The company is also
experimenting with various new technologies and if they are able to achieve it they would really
be pioneers in the industry.
 The company is working on a video headset with directional sound known as the “The
iVid Project”. The project is fighting hard to get the best software engineers for the
completion of the project.
 RLK Media has no prior outsourcing experience and outsourcing is one of the only
important issue that the CEO, ‘Lars’ has to make that could make or break the company.

Question that can be raised

 What are the risks at RLK?

 Is “R&D” RLK’s core competency if not, it should be outsourced
 Ultimately if the business functions are not enhanced by the core expertise or
competencies outsourcing of the business functions are deemed to be economically
feasible for a project and the company.
 There was a very urgent need for a very well embedded-software technology for the new
electronic consumer product (iVid Project). The chief scientist Ray is strictly against the
outsourcing of R&D to Inova which is impacting the R&D culture in RLK. RLK is also having
a very limited time frame to complete the project (12 to 18 months). The company also has a
very limited amount of capital or finances which is also affecting the situation.

Options for developing and discussing an action/implementation plan:

1) Outsourcing the project to Inova

2) Hiring 10 of the best software engineers of that time (for in-house development)
3) Outsourcing to Inova and hiring 3 or 5 best software engineers for the completion of the
project.

Synopsis/Conclusion:

Thus, to conclude as per my analysis I would say RLK Media’s best option should be (Option 3):
 Outsourcing to Inova and hiring 3 or 5 best software engineers for the completion
of the project because: -
 The software developers would also be limited to a single in-house development
and it would also be a short-term relationship between them.
 Overall, hiring 3 or 5 software engineers and outsourcing R&D would help RLK
to achieve its goal in the required time-frame with the help of limited investment.

Case Analysis: Mercury Rising: Knight Ridder’s Digital Venture

Overview:
Knight Ridder’s were the pioneers in the digital media space and thus were the second largest
newspaper company in whole of North America. The company was also the only one that has
realized the power of online news screening and thus they invested hugely in videotext.
 Like many other media companies Mercury online business is not very profitable and
there are hence struggling very hard to find the right tool, to make the online business
model work.
 Knight Ridder’s had to make a systematic plan to respond to the threats created by the
online competition.
 Schneider was also not able to implement many programs because she was focused on
the target (profit) as Tony Ridder’s had made a public statement that the company would
be profitable in the fourth quarter

Analyzing the Case:

The online market was changing, and the new era of internet was arising. The companies had
to fight hard to maintain their position in the market, which required to adopt to the changing
environment rapidly otherwise the new entrances will eat the old companies up. Knight Ridder’s
was aware of the market and the change it was going through. The newspaper business was
highly profitable in the US in that time as it was hard for many new companies to enter the
market as it involved high investment to enter the newspaper market. Knight ridders were
generating most of its profit from advertisement in 2001 (around 80%) (Exhibit 2a). Although
knight ridders had invested a lot in the online market and Videotex the company was not
attracting much traffic most of the people were just using the platform for personal use. This led
to a $50 million loss to the company on videotext.
Knight riders learned from their mistakes with Videotex and went on to implement the San Jose
Mercury News with Ingle, who believed that self-created, “virtual groups or communities” will
allow the newspaper to reach the large audience with targeted contents and mass medium.
Despite all the challenges such as the online site was giving the journalist the opportunity to
post any news at any time of the day which created problem as the news were not proper and
fully informational, the local newspapers editors were not helping Ingle San Jose Mercury News
still was successful in creating an online site.
In 1990s Dan Finnigan was appointed the director of KRNM and Ingle move to run the Knight
Ridder’s venture fund (which was found when the relationship between Zip2 and Knight Ridders
didn’t provide much success). The company was expanding its investment in different online
firms. Dan also separated the news media division and thus formally the evolution of KRD
(Knight Ridder Digital) was there. As, per Dan’s vision KRD was more than just an online news
platform. KRD and implementation of other new techniques helped Knight Ridders to rebrand
separate site like Silicon Valley.com etc. Between 1999 to 2000 knight ridders were also
attracting a lot of site traffic (Exhibit 8) but, still there was lot to improve and do for the further
ahead.
In 2000 the crisis in the internet market began to appear, most of the company’s stock prices
were beginning to drop down, even Knight Ridders were filling the hit of the market. A lot of
competitors of the Knight Ridders were also losing a lot due to the stock market fall which was
in some way good for Knight Ridders. There was a huge layoff of people in the company (Knight
Ridders) and there was a lot of cost cut down from the previous years. Although, Finnigan said
that, “the layoffs were not a sign of trouble but just means an opportunity to restructure the
business” (Page 10). Anyone at that time can say that Knight Ridders were also struggling hard
to beat the crisis. But, somehow the layoffs and restructuring were a positive sign for the
company as their expenditures were down and KRD had also build a national wide selling
advertising platform.
In 2002, Schneider was appointed the president and CEO of KRD as Finnigan left the company.
She faced a lot of pressing issues in the first few months of her appointment. She believed that
the whole idea of separating KRD was leading to many problems. She had clearly stated that,
“We do really compete in the local market” thus she asked here online managers to engage
themselves with the local news publishers again. She was facing many key issues like the
selling of the PDF subscription, deciding on whether to implement a large investment in a
registration database etc. Schneider was working very fine with KRD she knew that KRD had
lost a lot of reputation with Knight Ridders and thus she did not want to make any mistake to
further deteriorate problem.