Cathay pacific, an airline carrier company operating in the Hong Kong region with its operation primarily caring in the Asia Pacific Region from the origin Hong Kong Base. The Airline has a good base of daily good amount of passenger base and it primarily operates to 44 destinations all over. The company operates in the airline industry where the macroeconomic condition and the business conditions are the primarily role factors which determines the prospects of the company in the long term. The Company has been operating when the global oil prices has been volatile and the rising operational cost for the company generally has been rising with high amount of volatility in the passenger base in the airline. High Competition, Rising operational costs and volatile conditions are some of the factors that determines the sustainability of the company in the industry. In the year 2016, the company’s net loss amounted to HK$ 575 million, which almost increased to 1.5 times in the next year 2017. In the year 2017, the amount of loss ascertained by the company is HK $ 1.26 billion ($ 160 million). In this analysis, the primary focus will be on the balance scorecard analysis and the financial and operational measures of the matrix that defines the strength and the weaknesses of the Cathay Pacific and how the improvement can be done on the same.
The balance scorecard four major ideas or the business process will be discussed that are related with the growth, business process, customers and finance are some of the key factors evaluated while preparing a balanced scorecard. Balance scorecard is a strategic management tool or matric, which helps in understanding, identifying and improving the internal functions and there control and influence in the external business outcomes. The relevance of the balance score card is help in analyzing the financial and operational credibility of any organization that are helpful to determine the organizational measures and providing assessable and contributory feedbacks of the measures of various articles so that the company’s financial performance is uplifted (Al-Dhubaibi and Abdullah 2016).
Figure 1: Balance Scorecard
(Source: SearchCIO. 2018)
It is necessary that the proper data is collected and analyzed while assessing the various factors of the company. Rd. R Kaplan firstly introduced the balance scorecard analysis in the accounting academic whereas the Norton includes the non-financial factors or the information (Cooper et al. 2017). The inclusion of the balanced scorecard shows the financial metric and the evaluation of the company in terms of the defined objectives, measures, targets and the Initiatives taken by the company for the evaluation and the analysis of the company.
Figure 2: Matrix of Balanced Scorecard
(Source: SearchCIO. 2018)
Cathay Airways has been the leading airline and in order to sustain the future prospect of the company it is necessary to identify and evaluate the key factors of the company. The company has been reporting losses and the same has been due to the volatile economic factors and the rise in the input prices of the commodity and are losing the market share as the new companies in the aviation industry are providing the same services in lower rate than what the Cathay is offering. The balances scorecard analysis or the concept is important in the decision making purpose as the financial or accounting measure are not the only factors that determine the success of an organization. The balance scorecard factor is flexible in nature therefore for the required changes in the system are possible through this mode. Furthermore, the financial correspondence does not provide enough information to prosper in the todays and upcoming environment (Fullerton et al. 2014). As all the financial indicators that re available for the Cathay are based on the past events therefore the insight of the current as well as the future viability is to measure on the other relevant factors such as the consumer preferences and others. With the help of the Scorecard analysis, a suitable, consistent and reliable part can be triggered. The ultimate objective of this method to asserting the factors that are creating the value for the Cathay Pacific and directly influencing the ability to prosper. For that purpose, these three questions are to be answered (Ismail et al. 2018).
The current Balanced Scorecard for the Cathay Airways is based on the key utilization of the economic resources by improving operational efficiency, optimum utilization of resources. The only factor, which the management of the company can bring here to increase efficiency, is updating the assets of the company with current technology so that the utilization of the services are better and utilized at the optimum level. The key improvement area during the evaluation was the rising operational costs for the company but the same needs to be evaluated from the industry perspective. The rise in the prices of oil and rising operational costs in terms of key operating costs for the companies in the airline industry are destroying the margins of the company.
Figure 3: Current Strategy for managing the Key Resources
(Source: cathaypacific.com 2018)
From the research, it has been observed that the satisfaction level of the customer with the Cathay pacific is lower as compared to the other professional air transportation companies. The seating capacity and the arrangement and customer retention being also an issue for the company. However, it is crucial to note that the customer Yield becomes low to HK $ 54.1 in the year 2017 whereas it stood at HK $ 59.6 cents in the year 2015. This almost decline of 10% resulted into the profitability of the company.
The passenger market are almost preoccupied and therefore the company is getting problems to infiltrate in new and emerging markets.
As a provision of that the company has adopted a plan to increase the seating capacity by including an extra passenger seat. By that, the boing capacity of the flight can be increased. Moreover, they cuts down the number of executive class carrying capacity (Yücel and Ahmeto?ullar? 2015).
In addition to that the CEO of the company has agreed that they have to make nursery decisions so that the customer satisfaction and preference can be achieved. In addition to that, the travel habits and the competition will increase the efficiency of the company to operate. In addition to that being, an old fellow the company has some loyal customer base. They are required to be retained by providing privilege services.
From the sources as if the accounts and other cost areas it is being understand that the company is gaining loss because of the two main factors is that from the decrees in revenue and increase in the hedging process. The company has booked huge loss in the current and previous year and therefore it started to feel the pressure. The company has to take care of the operating cast as well as increasing the sales. The financial perspective for the company could be improved by defining the objectives and goals and the expected return to be created for the company. The two crucial performance measure which can be set up for the company is analysis of the key operating ratio and the return generation ratio’ for the company which can define the efficiency for the company in the optimum utilization of resources.
Figure 4: Financial Perspective
(Source: Savkin and Savkin 2018).
The internal business process refers to the strategies and policies, which are adopted by the business for improving the business structure. As per the analysis, which is conducted on the airlines, the business does not have an efficient internal process, which is clear from the high costs, which are incurred by the business. (van Helden and Uddin 2016).
In addition to that, the cost of operation from the Hong Kong airport the cost of operation is increasing. The increasing costs of the business is considered to be a significant problem and also affects the profitability of the business. In addition to that, the Hong Kong airport is heading toward building another runway the Cathay has to pay higher amounts for the landing and parking. The fees of that is more than 16% of the total revenue in the year 2016. The company in an attempt to minimize the increasing labour costs of the business has als9o adopted the strategy of decreasing the labour force of the business. In recent time, 600 employees of the company were terminated in order to cut down the operational costs of the business. In addition to this, the cost of fuel is also on the rise in global market. The business does not have a proper internal control system which is the basic reason due to which the costs are uncontrolled and have increased in recent times (Yigitbasioglu 2017).
In addition to that, the company cannot attain extra benefit in the year 2016 because of the badly wrong bet in the hedging process. In addition to that the major airlines are benefited a shorterm gain because of the declining of crude oil prices. The company has invested high in the hedging process because they think that the oil price will go high therefore it is being a faulty decision for the company.
The management of the company can adopt Balance scorecard as a tool of management accounting in order to improve the costs of the business. In corporation of Balance Scorecard would allow the business to supervise the activities of the business and would definitely reduce the unproductive costs and waste of the business which would in turn save the resources of the business. The critical success factor in such a case would be improvement in the internal businesses processes and also reduction in the costs of the business. The internal processes of the business, which can be improved, with the help of Balance scorecard is the quality management of services and also efficient labor training program. As the management if trying to acquire a competitive advantage, balance scorecard helps the business to improve the quality of services. The quality in service would attract more customers and thereby also contribute to the profitability of the business. The other performance measure, which the company can adopt, is incorporate an efficient training program which would allow the business to have skilled employees in the business. In recent year the business has terminated contracts of employment for many individuals, this policy would allow the management not to maintain the labour costs of the business but also improve the business process as the employees are considered to be the labor source of the business.
As per the learning and growth perspective of balance scorecard, the future performance of the business and also the expansion strategy followed by the business is also covered in this perspective. In addition to that this prospective focuses on the developing objectives and measures to drive learning within an organisation. In this portion of the study, the prime focus will be on the employee capabilities, information systems, employee’s willingness, training, motivation and others factors (Krishnan and Joshi 2017). These factors are coherent part of the growth system of the company. If all, of the employees emphasis on the work culture of the company and contribute the bets upon them then the targets can be perused easily (Otley 2016).
In case of Cathy Pacific, the company has achieved systematic growth in initial stages of 2015 and then the business entered into a declining phase where the financial position of the business was greatly weakened. The decline in sales of the business is mainly due to arrival of new competitors in the market in many other countries and they are also providing competitive prices for transport services. For such a purpose of the business needs to make technological advancements in the business operations and thus further improve the quality of the product of the business.
The critical success factor for the business is to achieve sustainability in the operations of the business and thus for such a purpose of the management of the business needs to consider all aspects such as environment, operations, economy and demand. In addition to that, Cathay has recently acquired the Dragonair so that it can achieve a sustainable coverage in the Southeast Asia and 23-mainland destination (Quattrone 2016).
The only prominent way out for the Cathay Pacific is that the aviation industry of the cargo and passenger transportation is forecasted to increase but the company have to suffer because of the increased competition (Sunarni 2015). Whereas, the after the increasing in the runway will resulting into the increase in the passenger capacity by 4.5 to 5 %.
The incorporation of Balance Scorecard in the business would be appropriate as the same would allow the business to facilitate innovation in the business and there by also improve the performance of the business. Another performance measure of the business which can be adopted is related to reduction in emission of pollutants in air and sustainable utilization of resources.
Conclusion:
From this balanced scorecard, it is being analyzed that the company Cathay pacific is going through various problems. The main reason of the problems is that is the negligence of the company and they suffered loss. To regain the market control and profitable situation the company has to take some serious steps like decreasing the cost of operation, increasing the efficiency of the employees. Increase in the flight capacity, proper maintenance of the cash hedges and improvising the quality of the service that they are offering to the existing and new customers. In addition to that, it is advisable for the company that the company should consume the small companies for the better market access and lowering the cost of operations.
Al-Dhubaibi, S. and Abdullah, A., 2016. The effects of management accounting practices on firm performance: antecedent factors and the role of managerial functions/Ahmed Abdullah Saad Al-Dhubaibi (Doctoral dissertation, Universiti Teknologi MARA).
Bhimani, A., 2015. International comparative management accounting. Wiley Encyclopedia of Management, pp.1-6.
cathaypacific.com. (2018). [online] Available at: https://downloads.cathaypacific.com/cx/aboutus/sd/2012/pdf/CX_SDR12_package_eng.pdf [Accessed 15 Nov. 2018].
Cooper, D.J., Ezzamel, M. and Qu, S.Q., 2017. Popularizing a management accounting idea: The case of the balanced scorecard. Contemporary Accounting Research, 34(2), pp.991-1025.
DIANATI, D.Z., Alambeigi, A. and Barzegar, M., 2016. INVESTIGATING THE RELATION BETWEEN APPLYING ADVANCED MANAGEMENT ACCOUNTING TOOLS AND ECONOMIC VALUE ADDED (EVA).
Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management, 32(7-8), pp.414-428.
Ismail, K., Isa, C.R. and Mia, L., 2018. Evidence on the usefulness of management accounting systems in integrated manufacturing environment. Pacific Accounting Review, 30(1), pp.2-19.
Jermias, J., 2017. Development of management accounting practices in Indonesia. In The Routledge Handbook of Accounting in Asia (pp. 126-136). Routledge.
Krishnan, A. and Joshi, P.L., 2017. Evolution and development of management accounting practices in Thailand. The Routledge Handbook of Accounting in Asia, p.95.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–2014. Management accounting research, 31, pp.45-62.
Qiu, Y., Shaukat, A. and Tharyan, R., 2016. This paper examines the corporate social responsibility (CSR) reporting undertaken by the 20 largest professional accounting firms in the United Kingdom. Professional service firms are knowledge-intensive organisations, eager to communicate their legitimacy, status and reputation, to an external world. These social evaluations (prestige) allow them to enhance their intellectual capital and consequently… The British Accounting Review, 48(1), pp.102-116.
Quattrone, P., 2016. Management accounting goes digital: Will the move make it wiser?. Management Accounting Research, 31, pp.118-122.
Saeidi, S.P. and Othman, M.S.H., 2017. The mediating role of process and product innovation in the relationship between environmental management accounting and firm’s financial performance. International Journal of Business Innovation and Research, 14(4), pp.421-438.
Savkin, A. and Savkin, A. (2018). A Financial Perspective of the Balanced Scorecard. [online] Balanced Scorecard Software – BSC Designer. Available at: https://bscdesigner.com/financial-perspective.htm [Accessed 15 Nov. 2018].
SearchCIO. (2018). What is balanced scorecard ? – Definition from WhatIs.com. [online] Available at: https://searchcio.techtarget.com/definition/balanced-scorecard-methodology [Accessed 15 Nov. 2018].
Sunarni, C.W., 2015. Management Accounting Practices at Hospitality Business in Yogyakarta, Indonesia. Review of Integrative Business and Economics Research, 4(1), p.380.
van Helden, J. and Uddin, S., 2016. Public sector management accounting in emerging economies: A literature review. Critical Perspectives on Accounting, 41, pp.34-62.
Yigitbasioglu, O.M., 2017. Drivers of management accounting adaptability: the agility lens. Journal of Accounting & Organizational Change, 13(2), pp.262-281.
Yücel, R. and Ahmeto?ullar?, K., 2015. The Effect of Advanced Management Accounting Practices on the Competitive Strategies and Performance. Business and Economics Research Journal, 6(4), pp.179-201.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download