PESTAL for china airlines

PESTLE analysis would be used in order to figure out external macro environment of China Airlines. by examining political, economic, social, technological, legal and environmental issues and trends of Taiwan within 1959 and 2009 time period. Political

Republic of China was established in 1911 and took under its control territory of China. After World War 2 it took Taiwan Island, which earlier belonged to Japan. However, during Civil War Republic of China lost its power and had to settle down in Taiwan. But it did not want to be under control of People’s Republic of China, moreover, it maintained that it was the valid government of Taiwan and mainland China as well. So, the relations between mainland China and Taiwan were frozen until 2007. Things became worth, when United Nations (UN) officially accepted the communist People’s Republic of China as Taiwan’s government. First, it lost its membership in International Civil Aviation Organization. (Why it was important? What caused?).

Also, due to the tight political relationships of People’s Republic of China with some countries, CAL lost international carrier contracts with Japan, Malaysia, Korea, Canada and Australia. One more example of political tension between Taiwan and mainland China happened when China Airlines accused mainland China of internationally attacking the plane with the missile.In 1991, CAL had to enter into joint venture with Koos Development Corporation and form Mandarin Airlines, in order to have an opportunity to operate in Canada and Australia.

The other wise decision was to rebrand the company. There was a Republic of China’s national flag on the symbol of CAL at the beginning. First, it could seem that CAL supports ROC, and trying to participate in political dissension and it can cause resentment from the civilian population, secondly, it might оттолкнутьcountries which sympathize PRC or countries which wanted to keep neutrality.

So, in order to avoid the influence of political situation of Taiwan on the airline as much as it is possible, CAL decided to change its symbol into pink plum blossoms and create new slogan-“blossom every day”. Thus, neutral brand image helped CAL to cooperate with several European cities as Amsterdam, Rome, Frankfurt and Vienna. Only in 2008, when Ma Ying-jeou became the president of Taiwan, significant steps on improvement of relationships between mainland China and Taiwan were taken. Improvement of the political situation positively influenced CAL. Eight Taiwan and five mainland China’s airports opened for flight operations.

This helped to minimize the flight time of CAL carriers, which caused the reduction of operational costs and increase in passenger flow due to the direct flights, which were undoubtedly cheaper than traveling by transit. Eleven airlines from mainland China and Taiwan started to operate 18 flights in each direction, be October 2008. Good political relationships with mainland China allowed CAL to enter into agreements with Chinese airlines. It agreed with China Cargo Airlines and China Southern Airlines to exchange cargo space, which produced win-win outcomes for all three airlines (ann rep, 2008), besides, CAL got an opportunity to join SkyTeam alliance.(Which what).

CAL started to cooperate with Chunghwa Post Co. in delivery of daily mail and postal goods to China. Expanded cross-strait flight agreement, signed on April 2009, allowed to increase passenger flights from 108 in 2008 to 270, and cargo flights from 30 in 2008 to 112 return services per month in 2009. CAL started 55 scheduled direct flights to 13 cities in mainland China. However, improvement of the political situation with mainland China and opening cross-strait routs allowed expansion not only for CAL, but for Chinese airlines as well, which means that CAL experienced strong competition. From the low cost mainland China airlines.


The Chirman of China Airlines Philip Wei states that “about 1 million of Taiwanese business people doing business in China. They constantly go back and forth between the two sides”. The other point is that, when people have jobs, they have money, wich they can spend on flights. Thus, unemployment rate of Taiwan is directly correlated with the passenger flow.

National Statistics, Republic of China reports that starting from the 1978 to 2010 unemployment in Taiwan had an upward trend,, and the averageunemployment within this period was 2.95 %. unemployment in Taiwan within this period reached its highest point in 2009 and lowest in 1981, which accounted for 6.13% and 0.86% respectively.

In general unemployment rate of Taiwan had an upward trend, which means that, first, less and less people had an opportunity to travel by plane, because of absence of work and as a result absence of money; and second, less people are doing business in China and travel there. So, it can be said that unemployment rate of Taiwan within 1978-2010 time period negatively influenced airline businesses as a result China Airline Ltd.

Despite the fact that political situaion and unemployment rate of Taiwan was not positive GDP of Taiwan during 1950-2010 had an upward going trand.

An average economic growth of Taiwan over 1950-2010 was 8,10%,, during almost the half of the century Taiwan transformed from having a poor, agrarian to a developed economy.

It can be seen from figure 2, that Taiwan’s growth rates exceed world economy almost in all years within 1951-1999 time period, however, in 1973 and 1979 it dropped dramatically, mainly because of the oil price shocks. As it was mentioned in the case, rising profits of CAL were paused because of oil crisis in 1973. However, oil shocks negatively influenced not only CAL, but the whole Taiwan.

Increase in price for oil, deceased the revenue for airlines, because it can be seen from the financial statistics that operating revenues minus operating expenses give operating profits of the company. Increase of price for fuel increase operating expenses of CAL and other airlines, thus, reducing operating profits. And taxes for government are taken from the operating profits, which means that the less CAL got in operating profit, the less amount of money could be got from tax.

Annual report of CAL in 2009 defines that in recent years aviation again suffered from the rising of fuel prices (Annual rep.2009). For instance, in 2007 when competitors from mainland China presented profits, CAL suffered from loss of NT$2.52billion due to the increasing costs for fuel and certain situational factors (Ann rep.2007).

Social Since the establishment of CAL in 1959, population of Taiwan had grown to 23000000 people by 2010 (figure 1), which means that potential market for sale had also grown.

The more people in the country the better for the companies, because there are more chances to gain profits when population accounts for the 23000000 (figure 3), than when it is 15927167as it was in 1974 ( Life expectancy of Taiwanese citizens increased as well (figure 5), for instance, the average life expectancy of Taiwanese person reached for 78.15 years by 2010. This means that the number of retired people had increased. Most often, people in retirement spent their time for leisure, traveling. (find what old taiwaneese do) That is why; people in retirement are potential clients for CAL. On the other hand, there was a decrease in birth rate ( ).

High per cent of retired citizens in accordance with the small birth rate meant that there were little workforce in Taiwan, so, the cost for labour increased with the increase in life expectancy rate and decrease in birth rate. Besides, it can influence not only workforce of the country, but the brainpower. Old people are less able for innovations, for development of new abilities, concentration is also, lower , than young generation. From this point of view, company could experience difficulties with the workforce for the company.CAL is actively involved in charity programs, mainly to support children, indigent families and young students (Ann.rep 2009).

For instance, in 2009 CAL and the ROC Red Cross Society held fund-raising activity called “Making Dreams Come True”. China Airlines donated more than NT$1.39 million, obtained from in-flight duty-free sales, to support poor families and subsidize living cost of young students (Ann rep 2009). Such actions tiny, but help to increase the level of life of Taiwanese, and indirectly can influence increase in number of educated people in the country, which is important for CAL itself, because it is a huge company, which need a lot of qualified employees. Taiwan has diversified culture, … CAL always tried to support cultural heritage and share it with other nationalities. That is why, CAL involve itself in social-benefit activities, helps to promote tourism, culture, arts and sports events (Ann. Rep 2009).

For example, in 2009 CAL in accordance with Taiwan’s biggest bicycle brand, named Giant, promoted the “Cycling Paradise Taiwan” campaign in order to attract overseas travelers and share warm friendship of Taiwanese people and their diverse culture (Ann rep 2009). Moreover, Taiwanese government launched a project on increase of the number of tourists in the country (ann rep, 2007). China Airlines actively support this project and offers its resources to attract international tourists and media. (ann rep, 2007).

This social involvement of CAL, beneficial for both: government and the company itself, because on the one hand, the flow of tourist can increase the GDP of the country, as they are potential потребители, on the other hand, tourists are potential clients of CAL, and the more number of tourist visit the county, the higher can be profits if CAL. It, also, support sport events, than as well can increase tourism in the country, which beneficial for CAL (ann rep 2007).

Technological Much of Taiwan’s achievement in science and technology is attributable to public support for applied scientific development. Government-sponsored agencies, such as the Industrial Technology Research Institute and the National Applied Research Laboratories, have played important roles in advancing Taiwan’s scientific and technological development by conducting research, aiding R&D in the private sector and exploring new technologies.

To maintain Taiwan’s competitive edge in information technology, the government, industry and universities are active in efforts to develop cloud computing by rolling out new designs and supporting the creation of a "Taiwan Cloud Valley For many years, Taiwan has ranked among the top five countries for the number of patents issued by the U.S. Patent and Trademark Office.

It was the No. 3 recipient of all types of U.S. patents over the period 1977 to 2011. In terms of output of scientific papers, Taiwan ranked 16th worldwide in 2010 for the number of papers published in journals tracked in Thomson Reuters’ Science Citation Index, and ninth for those published in journals tracked in the organization’s Engineering Index. CAL owns world biggest-capacity 120000 pound engine test cell which allows maintaining its own aircraft engines and those of other aerospace companies and airline fleets in East Asia.

Additionally, it is valuable and well organized because it shortens maintenance time, improves quality and helps with the recruitment of clients and the reduction of flight safety costs. The latest technology and high cost make this resource rare and hard to imitate. One more technological invention added by CAL is located at the High-Speed Rail Taoyuan Station. It offers flight check-in, baggage check-in and boarding pass insurance, which saves passenger’s time and relieves from lugging his/her baggage around.

Besides, it provides 25% discount on the rail ticket, which is purchased together with CAL ticket. First of all this resource provides travelers with insurance, discount on tickets and convenience while making check-in if they have heavy luggage. Secondly, it is rare, as no other Taiwanese company can offer such service to their customers. Thirdly, it is difficult to copy this resource as other companies will have to make contract with such train stations in order to cooperate with them and finally it will be costly. Concerning organizational part of VRIO framework, this process is planned and well organized.

Environmental With the high development of Taiwan, it suffers big environmental problems. With the beginning of usage of mountain resources of Taiwan, it started to suffer from pollution of water, soil erosion, landslides, forest fires, sedimentation of reservoirs. ( ) Airline business seriously pollutes the environment, because plains need a lot of fuel, and the testing machines and other equipment also, bring damage to the environment. Big cities as Taipei and Kaohsiung mostly suffer from