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The Issue of Cost Management & Benchmarking Strategies Discussion

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Running head: CATHAY PACIFIC 1

Cathay Pacific

Executive Summary

The issue of cost management is one of the main challenges facing organizations because

of the profitability targets and expectations. The main issue is to come up with ways of ensuring

that the strategies can be measured adequately to determine whether they have succeeded as

expected. Yeung needs to assess the possibilities adequately before making a decision in order to

ensure that the organization gets the expected benefits. A look at the situation of IT outsourcing

in the region and the airline industry shows that many organizations are increasingly relying on

external contracts to meet their organizational needs. Cathay Pacific should engage in talks with

its smart sourcing partners IBM and Sabre solutions.

The focus of the talks should be on the renegotiation of the contracts in order to introduce

efficient benchmarking strategies. Competitive pricing and benchmarking has to be applied to

increase the level of savings that the airline gets. The management and maintenance of the

airline’s workstations and infrastructure should be given to vendors with clearly spelt contracts

on what is expected in terms of the services and competitiveness. Initially, the airline will

provide in-house support for the 3200 out port workstations while assessing the effectiveness of

the renegotiated contract in order to incorporate the 3200 at a later date. The main limitation of

the study is that there is insufficient information regarding the application of IT outsourcing in

the airline industry in Asia. It was difficult to find financial data on the state of IT outsourcing in

airlines in Asia for comparison.

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CATHAY PACIFIC 2

Chapter 1

Introduction to the case study

The focus of the case study is the problem facing Cathay Pacific in its quest to cut costs

while delivering premium products. It revolves around the message from the CEO of the

company on the need for the company to ensure that its costs are optimized in order to compete

efficiently. The company faced a serious problem because it had to cut down coasts year by year

without compromising on quality in order to prevent profitability from suffering. The general

manager of information management was given the task of ensuring that his department was

working in line with the goal of the organization of doing more with less by outsourcing and

working with the strategic partners (McFarlan & Young, 2003). The key issue in the case is the

strategies that Yeung has to apply for smart-sourcing in order to ensure that the organization gets

the best from all aspects. Yeung had been in the organization for the past 30 years during which

he had outsourced most of the IT functions to strategic partners. The question was whether the

current strategies were effective in producing the expected outcomes and the approaches that had

to be applied to improve the effectiveness of the outcomes for all partners.

Cathay Pacific airways is a Hong Kong based carrier that has been in Operations since

1946. Acquisition by the largest trading company in Hong Kong allowed the company to grow

and expand into the region becoming the flagship carrier for Hong Kong in the 1960s. The

company is highly innovative and applies cost cutting strategies especially regarding its

management information systems. It was among the first to incorporate computerized reservation

systems and flight simulators. The case study involves the need to develop new measures such as

the initiation of a paperless office or other customer loyalty strategies to boost revenues and cost

management (McFarlan & Young, 2003). The focus of the case study is on the different

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Running head: CATHAY PACIFIC 1 Cathay Pacific Executive Summary The issue of cost management is one of the main challenges facing organizations because of the profitability targets and expectations. The main issue is to come up with ways of ensuring that the strategies can be measured adequately to determine whether they have succeeded as expected. Yeung needs to assess the possibilities adequately before making a decision in order to ensure that the organization gets the expected benefits. A look at the situation of IT outsourcing in the region and the airline industry shows that many organizations are increasingly relying on external contracts to meet their organizational needs. Cathay Pacific should engage in talks with its smart sourcing partners IBM and Sabre solutions. The focus of the talks should be on the renegotiation of the contracts in order to introduce efficient benchmarking strategies. Competitive pricing and benchmarking has to be applied to increase the level of savings that the airline gets. The management and maintenance of the airline’s workstations and infrastructure should be given to vendors with clearly spelt contracts on what is expected in terms of the services and competitiveness. Initially, the airline will provide in-house support for the 3200 out port workstations while assessing the effectiveness of the renegotiated contract in order to incorporate the 3200 at a later date. The main limitation of the study is that there is insufficient infor ...
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Tags: cost management Benchmarking Strategies Infrastructure workstations Financial Data