2.Evaluation of Business Environment (SWOT/5-Forces Model)
1. Evaluate the progress Cathay Pacific has made on outsourcing their IT activities. Do their ideas make sense to you? Why?

1. Threat of new entrants--LOW * Large capital requirements * Industry regulation * Technical requirements * Pilot shortages * Government control ()
The airline industry requires large capital and high technical. Also, there are a lot of regulations within the industry. And many government now put pressures on new start-up aviation companies, take China as an example, Civil Aviation Administration of China now do not approve to set up new airline companies. New entrants into this field would face large barriers. Thus, the treat of new entrants is low. 2. Threat of substitutes—Medium * International routes-shipping * Domestic routes
Long distance bus
Railway
High-speed rail…
In the international routes, the substitute for airline is shipping. In domestic routes, the substitutes are long distance bus, railway, and high-speed rail. Although, these would take more time to reach destination. However, they are cost- effective choices especially the high-speed rail comparing with airplane. High-speed rail is gradually operating in a large scale with convenience and comfort. There is a saying that in the future, once the airplane could reach, so could high-speed rail. So we judge the threat of substitutes is medium. 3. Bargaining power of suppliers—LOW * Aviation fuel * Aircraft
In terms of fuel, the airline company is the recipient of the oil price.
In terms of aircraft purchase, Airline Company is in the weak negotiation position. Thus the bargaining power of suppliers is low. 4. Bargaining power of buyers—LOW * Customer loyalty * Substitutes
Customers are very dispersed. The majority are chasing for low price. In