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.
Porter’s Five Forces Model
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.
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
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
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
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
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.
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