TO MOVE OR NOT TO MOVE: CATHAY PACIFIC AIRWAYS

Presented By-Muhammad Anowar (A09)

Shallu Jamwal (A15)Mahim Uddin Fahad (A30)

Praneet Kaur (A31)

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INTRODUCTION

The airline was founded on 24 September 1946 by Australian Sydney H. de Kantzow and American Roy C. Farrell.

It’s major shareholders are Swire Pacific and Air China.

In 2010, Cathay Pacific became the world's largest international cargo airline.

Cathay Pacific has won the "World's Best Airline" award four times, more than any other airline.

THE CASE

The Cathay Pacific Data Centre in Hong Kong was divided into two main sections: production and development.

The production section at Hong Kong island and development centre at Kowloon.

Fire.

The immediate question raised was: How could the company ensure the security of its Data Centre operation?

Contd.

The overcrowded situation in the multi-tenanted office buildings in Hong Kong had already placed limitations on the Data Center. Could Hong Kong provide the solution?

.

THE FIRE

A major crisis occurred in 1991.

A fire shut down one of Cathay Pacific’s Data Centre offices at Quarry Bay in Hong Kong.

Normal business was interrupted for almost 13 hours.

After the crisis broke out, the company’s management realised that the necessary repairs would take at least one week.

Contd.

95 major application systems were shut down and data had to be backed up to tapes in order to obtain a current reading of the company’s business data.

During the recovery period, the Cathay Pacific staff and vendors’ staff had to complete over 500 tasks.

After two very tense weeks, the Quarry Bay office in Hong Kong was finally restored and ready for normal operations again.

Cathay Pacific’s Data Centre in Hong Kong was located in three separate office buildings and there was no room for expansion in those offices.

CASE ANALYSIS & SOLUTION

The immediate decision to be made by the Company was whether it should relocate the Data Centre or outsource the operation.

If the Company did decide to relocate to more suitable premises, where should this be?

1. The Re-location Option: The Company drew on the experience of other companies that had been involved in data centre moves and offshore relocating.

A) Halifax Insurance’s Date Center Merge: In August 1993, the Halifax Insurance company’s data centre operations in Toronto and Indianapolis were merged.

Contd.

B) Cathay Pacific Guangzhou Data Processing Centre: It handled the manual data input of the company’s financial data.

This re-location represented one of the very first examples of a major Hong Kong company taking office jobs across the border in search of comparative advantage - lower labour expenses and land rental costs.

C) China and the Open Door Policy: In the case of China, the Open Door policy presented attractive solutions to the company.

Cathay Pacific and the Chinese government would mutually benefit from the former’s decision to invest in and to relocate its Data Centre operation to China.

Contd.

D) Singapore: Singapore offered the following advantages: It is located in the centre of the ASEAN area and along the major shipping routes between the Middle East and Pacific destinations.

Also, it had a good infrastructure.

One more reason was that the government provided many incentives to investors.

E) Australia: Australia was attractive for the following reasons: Australia had the fibre optic telecommunications infrastructure that Cathay Pacific desired.

Contd.

The country also had many well-established, larger computer installations.

The price of land also played an important part in the selection process.

The price of land in Australia was a fraction of the cost of land in Hong Kong. 

Factors Considered in the Data Center Re-location

The main selection criteria were identified as: the availability of supporting infrastructure,

political stability,

availability of human resources with relevant skills,

the accessibility of support services from suppliers,

a time zone that was close to that of Hong Kong.

Furthermore, factors of production were used to determine the competitive advantage that could be gained from each country.

Contd.

China, Singapore, Thailand, the Philippines, Canada and Australia were the six countries initially evaluated using these criteria.

However, Thailand and the Philippines were the first to be eliminated due to their immature supporting infrastructure, political instability and lack of relevant skilled human resources.

Canada was eliminated because of its reverse time zone relative to Hong Kong.

To Move or not to Move?

A senior management team, formed to assess the viable options available to the Company concerning the Data Centre, was asked to present their report and recommendations to the Board of Directors.

The immediate issues that the team had to address were the security and safety measures.

However, in considering the other motives for a relocation of the Data Centre, it came to light that many other factors associated with being located in a crowded commercial city environment emerged, including inadequate power supply and high property and rental prices.

Contd.

These location-related disadvantages to the competitiveness of the Company had to be identified before the Company was able to establish the criteria for seeking a suitable alternative.

Underlying this project, the directors of the Company were concerned that there not be a repeat of the fire incident in 1991.

SUGGESSTIONS

After studying and analyzing the case, we would like to forward few suggestions to Cathay Pacific. They are:

Strong infrastructure would have save them from fire.

Efficient handling and backup plans.

Immediate connectivity with necessary suppliers or potential partners.

Avoid mismanagement.

Immediate action plans against any calamities.

Thank you