External Environment Analysis

Aviation Strategy and Planning Report.


Asia Miles is one of the known travel and Lifestyle program operating under Asia Miles Limited in Hong Kong and wholly owned by Cathay Pacific Airways Limited since 1999. The company has been able to offer great travel and lifestyle benefits to 6 millions of people worldwide with the various reward programs they have under them. It offers the chance to its partners to earn a good amount by spending on various range of travel and lifestyle products and services such as hotels, flights, dining, retail and others. The program also gives a good chance to the members of the reward programs to earn miles and with these miles they can redeem various facilities such as hotel stay, shopping vouchers and various other gifts for themselves (asiamiles 2018). However, such offerings of Asia Miles has helped them to earn the trust of their partners that join with them to earn profit for their business. 
    The report discusses about the business environment that is presently faced by AML and the strategies it adopts to cope up with the business challenges. Further it analyses the relational link that AML acts between Cathay Pacific Airways and its other business partners and further recommend on the strategic opportunities of AML. 


Every business is effected by the environment it is operating, both internal environment and external environment. These environment influence the strategy that the business take in order to stay in the industry for longer time and earn competitive advantage over others. Thus, the two models that will assist in analyzing the industry as well as external environment of AML are Porter’s five forces model and pestle analysis. This will help AML to analyze the industry it is operating and the strategy it should take in order to gain trust from all its strategic partners. 

Porter’s Five Forces Model

Bargaining power of the suppliers
    The bargaining power of the suppliers in the airline industry in which Asia Miles Limited operates is low because of the suppliers face frequent competition from other suppliers in the business (thepointsguy 2018). Moreover, they do not want to lose their business form such large airline rewards programs as the companies can easily switch from one supplier to other without any switching cost. 
Bargaining power of the buyers
    Bargaining power of the buyers on the other hand is high in the airline industry as there are a lot of airline business that offer such reward programs to its customers. Moreover, due to no switching cost the buyers can easily switch from one reward program to another by analyzing the benefit they are getting from these reward programs. Thus AML has to be updated about the changing situation of the industry in order gain the trust of the customers. 
Competitive rivalry
    Coming to competitive rivalry then the industry is facing huge competitors from various airline companies and such reward programs that they are offering. This is the greatest threat AML faces from the airline industry it operates. The competitive environment that the industry offers is intense as all the competitors offers similar reward services and try to attract customers towards them with same kind of facilities. 
Threat to new entrant
    Threat to new entrant is moderate in the industry as the reward services that they provide does need moderate amount of investment. Thus, it becomes difficult for the new company to come up with such programs easily in initial stages as huge investment is needed to form partnership with good hotels, airline companies and others (thepointsguy 2018). Thus, the financial condition of the new company will not support to take up such investment initially. 
Threat to substitutes     
    Threat from substitute is high in the industry this is because there are various substitute that the industry face that can offer similar facilities like these reward programs. There are a lot of companies like travel agencies that offers travel options at a very less cost along with various complimentary program. Thus many customers find the facilities offered by these agencies and tour programs cost effective and better than spending and being members in these reward programs. This might affect AML in a long way to gain the trust and loyalty of the customers. 

External environment Analysis

Economic: the economic condition of China plays an important role in defining the strategy and demand the reward program will face. China has a moderate economic growth and is still known as one of the developing economy in the world. The GDP of the economy is USD 11,212 billion which is much less than any developed economy. However, the economy is facing fast growth due to its technological advancement (focus-economics 2018). Moreover, with reducing unemployment rate the purchasing power of the people is increasing. This will have a positive impact on the business. 
Social: the people of China loves family timing and love to go to places in a collective form. However, the society is still restrained from putting much emphasis on leisure time and believe to spend a conservative life (hofstede-insights 2018). This might prove to be challenging for the travel reward program as they might receive less demand as expected. 
Technology: China is a technological well advanced country and is improving its technological sphere day by day. This is helping the companies to gain a lot of strategies which companies of other countries are unable to use. This will offer an opportunity for AML to take up new strategies in future. 

Strategies to cope up with the Challenges 

The major challenges that Asia Miles Limited face from its business and external environment are huge competition, social restrain of the people to travel and have fun and threats from substitutes. 
    To cope up with the challenges and use the opportunities, Asia Miles has been adopting various strategies over time and expansion program. This has helped them to be in business and gain competitive advantage over other competitors. 
    Asia Miles faced huge challenges in 2014 as there were many hindrances coming from legacy technology of hotel and Car service partners. This is because members faced a lot of problem while redeeming the reward from these service providers. Thus, Asia Miles made a plan of making the redemption system much easier for the members by leveraging the technology to improve their experience. The strategy that Asia Miles took was introducing technologies like multi-channel approach, localization, redemption shopping, multi-supplier inventory and others. These options were incorporated in their website to make members easier to find a solution. This was possible only due to technological advancement that the country offers. 
    The other strategy that Asia Miles adopted was to revolutionized the reward program. This was done to gain worldwide membership and cope up the challenges it faced from fierce competition. ICLP helped the program to understand the need of the customers and take up innovative projects. This helped AML to meet the emerging needs of the customers as well as the business (iclployalty 2018). The program was also able to overcome its challenge of offering greater customer satisfaction from this strategy. 
    The third strategy that the company always followed was a systematic partnership strategy such as forming partnership with Standard Chattered, ICLP and others, which helped them to gain non-airline partner which can offer increased member redemption rates year after year. This helped them gain 6 million members for the program worldwide presently. 

Synergy Effects AML create

Cathay Pacific Airways Limited is coming up with its official loyalty program and is the owner company of Asia Miles Limited. Asia Miles operates as a subsidiary company of Cathay Pacific Airways Limited and the reward program that it offers acts like an Unaffiliated reward program. However, being a subsidiary company of Cathay Pacific Airways Limited, Asia Miles has to form a cooperative strategy between Cathay’s new Loyalty programs that is the Marco Polo Club. Being a part of Cathay, the members of Marco Polo Club will automatically become the member of Asia Miles reward programs. The members of both the club will share the same membership numbers and will help to enjoy the best of both the programs. They will get the same benefit as the members of Asia Miles receive from its strategic partners. This is called the synergy effect that will be created between Asia Miles and CX new loyalty program and the strategic partners of Asia Miles such as the Standard Chattered (openjawtech 2018). The synergy effect that AML will create consists of:
    Firstly, AML will allow the members of Marco Polo Club to be a part of their membership program by offering them better discounts and better reward points. This will help Asia Miles to increase their customer base even from the official Loyalty Program of CX. 
    Secondly, AML will form partnership with the new loyalty program and also with their strategic partners such as the Standard Chartered. While doing this, the members of Marco Polo Club will also be getting the MasterCard of Standard Chartered and enjoy the benefits that the members of Asia Miles enjoy. 
    Third synergy effect that the program will create is between the club and Hotel and car rental companies with which it has gained its partnership. Thus, the members of the club will get all the hotel and car benefits that Asia Miles offers such as reservations, check-ins, baggage allowances and others (iclployalty 2018). 
    However, the validity of the membership card of Asia Miles and Marco Polo Club varies because the membership card of Marco Polo Club is only valid for one year and that of Asia Miles is lifelong. Moreover, members can enjoy miles and earn club points by travelling to various destinations from Hong Kong. On the other hand, Marco Polo Club membership allows to earn benefits on the ground such as hotels, car rentals and other life partners. Thus, Asia Miles will distribute its facilities and benefits it offers between itself and the club. 
    The partners that will help offer benefits while travelling will form partnership with Asia Miles such as the airlines. Whereas partners that offer non-airline benefits such as the card benefits, car rental benefits and others will form alliance with Marco Polo Club. It is further stated that Asia Miles allow members above two years to join the club; however, the club membership will be earned only above 12 years of age (iclployalty 2018).
    Thus, the benefits offered by Asia Miles will act as a complement to the members of the Marco Polo Club. This adds to the privilege that the program offers to its people. The members of both the clubs will enjoy the best of both the programs and the facilities that they are offering. 

Recommendations for AML should consider 

Even with such strategic strength and string partnership, Asia Miles and Cathay needs to strengthen their position in the market and improve their competitiveness. This is because, various other travel companies are coming up with similar programs and with similar facilities. This might adversely affect the market position of both AML and CX. Thus there are three recommendations that the business should take up and continue to successfully fight competition till they are in business. 
    The first recommendation that Asia Miles and CX needs to follow is to carry out extensive research and development in their business operations. They should develop a separate internal team to carry out market research frequently. The team will be responsible to carry put research on new entrants, their business motives, strategies and the potential they have in the industry. Along with this they will also look after the changing needs and preference of the customers as they are the most valuable asset of the business (Chaffey and Ellis-Chadwick 2016). Both the research will help the business to gain an insight of the competitive edge that they are facing or they might face in future and make predictions. Accordingly they can change their business strategy and their way of carrying out the business. This is required because research and development is the best way to keep an eye on the competitors.
    Second recommendation that the business should follow is to try and offer the facility and membership to the customers at comparatively low rate than before. This is because the competitors are that will enter the business will offer great discounts initially. Thus, to keep the members intact and gain more members, Asia Miles and CX will have to check on their prices and compete with the new entrant. The most effective way to do this is by controlling the cost (Schut et al. 2016). This is because only by cost control the business will be able to offer low price for membership without making any losses. As both the programs are able to make a position in the market, it will not be difficult for them to influence its loyal partners for cost reductions. 
    Third recommendation that AML and CX should follow to widen their market position to take up extensive marketing strategies. Marketing is the essence of the any business as it helps in spreading the recognition of the business. However, the marketing strategy that Asia Miles and Cathay should take up is online marketing (Rothaermel 2015). This is because with such technological advancement in Hong Kong, online channel will be the most appropriate channel to spread the motive and offerings of the business. Moreover, new companies and programs nowadays are extensively involved in marketing activities and any lag in marketing would cost AML and CX a lot. 
    Thus, these are the three recommendations that will help both the programs to strengthen its areas in which it lagged in some way or the other. 


Form the above analysis it can be concluded that Asia Miles is one of the best travel reward program operating in Hong Kong and has strengthen its position by taking up continuous strategies. The recent strategy of AML was to form synergy with CX official loyalty program that is Marco Polo Club. These strategies has helped AML to deal with all the challenges it faced from the market and external business environment. Along with it the synergy of Asia Miles along with Marco Polo Club was another important strategy that they took. This helped them to offer better and extended facility to the members of both AML and the club. Moreover, the business also took other steps as well to cope up with the intense competition. However, along with such initiatives there are certain loopholes that they face. Therefore it is recommended to both the program to take up extensive marketing initiatives, cost control and price control strategy and research and development programs. This will help them to also handle the new entrant that is entering the industry every day. The research and development team will help them to research the strategies of the new competitors and also the changing demand of the customers. On eth other hand marketing will help them to spread their recognition in the market more than the competitors and the new entrants. Moreover the price control system will help them to fight the competition coming from substitute and attract members that choose to opt those tour agencies.  

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