Business Strategy Management Case Study: Virgin Australia

The differentiation strategy

Case study on Business Strategy Management.
 

Several strategic models can help an organization establish a competitive advantage over its business rivals in the market (Magretta 2012). Business organizations might choose to operate or compete across a focused or broad market. Companies might apply cost leadership, focus, and differentiation. The strategies are applicable at the unit level of the business. For the case of Virgin Australia, the differentiation strategy fits it well for the purposes of gaining competitive advantages over its rivals in the market.

By tailoring the entire marketing program through finding different ways of being unique in the market place companies are able to gain competitive advantage over its competitors. The company can establish a unique position in the market by differentiating the services, products, brand, and employees. In the competitive airline market, Virgin Australia can be able to gain advantage over it rivals by using the product positioning strategy. Some aspects that can help distinguish Virgin Australia from its competitors are discussed.

Some of the methods and strategies that are used in ensuring the company maintains its competitiveness include international joint ventures, the differentiation strategy, branding and culture, product and service positioning, and market segmentation.  

The differentiation strategy is involved in product or service development that offers unique features that the customers value and take as different or better in quality than the services from the competition. Therefore for Virgin Australia, differentiation is the strategy to go as the products, services offered involves transport of goods, and people do desired destinations. It provides comfortable transport of both goods and passengers.  The value the unique product adds allows Virgin Australia to charge premium prices. The process of charging premium prices will enable the company to cover the extra cost that comes in by offering the unique transportation. Because of the unique services Virgin Australia offers, if the suppliers of the product in any case increase the prices the company can pass the costs to the customers. The differentiation strategy will enable Virgin Australia to have; a reputation in the cooperative world for innovation and quality, a strong sales team, innovative and skilled team, and access to high scientific research. However, Virgin Australia has to ensure it is flexible and agile in the process of developing new products used in the cleaning process. Some of the risks Virgin Australia might encounter in the market by using the differentiation strategy include; changes in customer taste, imitation by their competitors, and loss in value of the services they offer. The ability of VirginAustralia to be agile and flexible will enable it compete fairly with their competitors that will use the focus strategy in the same market environment.

Sustainability through branding and culture

Using individual customer needs basing on experience is one of the ways of increasing customer base using the differentiation strategy. Start by knowing what the customer needs and what he or she wants and thus equating to expectations. After analysis of the customers who are mainly over 30 years, the company will be able to work backwards to formulate new experiences that will be higher than what the customer expects. In order to achieve this, the company will speak to their customers and after listening delivery of superior experience is necessary. Another way of increasing the customer base is through the creation of experience between the customers and the real employees thus its uniqueness. Many customers prefer meeting with real people as opposed to getting emails and messages from the company. Ensuring that the engagement with customers is a personal experience helps in building a strong relationship between the company and the customers. The process of ensuring personal meetings with the customers enables the company to increase its customer base, as the loyal customers will communicate with other customers. Innovations in airline market especially to go with the needs of the customers is important for Virgin Australia to increase customer base. Differentiating allows the company to give the customers a good reason to buy your products and use your services as opposed to other competitors’ products. It should answer the question what makes you different. Customization of flights according to age groups will be a clear strategy of increasing customer base. 

In entering new markets, competition from other companies often leads to the profits going down. However, the sustainability of the business company can enable it survive any competition from other firms. The business strategy used can ensure competitive advantages in securing of customers and defending against competitive forces. Virgin Australia clearly has a sustainable competitive advantage over its competitors because of several reasons.

Established culture and brand ensures Virgin Australia’s sustainability in the competitive front. External branding which is critical in ensuring customer loyalty and awareness will enable Virgin Australia survive the competitive airline business. Virgin Australia continuously participates in promotion activities and charity events as a method of promoting its brand both internally and externally. Often, customers remain with brands they are loyal with without considering the price of the products and services being offered. Through focusing on building strong relationships with its customers, Virgin Australia continues to deliver high quality services and great customer experience. In addition, Virgin Australia also provide unique services, which involves provision of music systems, monitors and massage parlors in the planes. The uniqueness of Virgin Australia will allow it to be sustainable and compete in the market that has increased competition over the years. The other aspect that will ensure Virgin Australia remains sustainable is the customer services it provides. It took time for the company to establish its customer services but after being established it has been hard for competitors to develop a reputation that can be compared to it. In summary, the ability of Virgin Australia to focus on the environment, the business and the people enables it to have sustainable economic advantages needed to survive the competitive business market.

International joint ventures

Entering into an international joint venture with other international airline companies will enable Virgin Australiato expand its business. Virgin Australia will be able to gain some advantages in the joint venture. However, there are some risks involved in this kind of international joint venture.

Some advantages of international joint ventures include; it allows for faster and cheaper access to foreign markets. It provides a faster access to the distribution channels and knowledge on the local markets and this enhances sustainability and success of the joint venture (Campbell &Netzer 2011). In addition, the resident partner, which in this case is any other airline, willalready be having existing relationships with key customers and suppliers and the proficiency in the local values and language. Another advantage of this joint venture is that it allows for sharing of risks and costs between the two partners (Campbell 2013). In case of any losses in the business or tragic accidents, the two partners will share the costs of damages thus reducing the quantity of financial assets that will be lost. Finally, the business venture will move quickly in addition to being credible and effective. However, this depends on the reputation of the resident partner in the local market. International joint ventures can also enable the two partners to take advantage of synergies and complementary business lines that are in existence between the two companies (Chatterjee & Gray 2014).

International joint ventures also pause risks including; inadequate planning and strategies may result to failure and a frustrating experiences for the partners. Some aspects can be difficult to anticipate especially due to poor and inadequate planning. Issues with technology, marketplace developments, economic downtowns, and uncertainties with regulation can have drastic impacts on international joint ventures. Another risk is the possibility of creating a competitor in your own partner in the joint venture. However, this can be solved through non-competition and non-solicitation from the joint venture agreements (Wolf 2012). Finally, joint ventures can result in management issues because of the diluted profits due to sharing. Partners may discover their inflexible nature and inability to share expectations with their partner because of different management philosophies. The inflexibility of the partners to change and evolving needs of the joint venture can lead to failure of the business. All these risks have to be taken into consideration in the formation of the international joint venture. 

Market segmentation is created based on several strategies and some consumer characteristics for example behavior and demographics. Market segmentation involves the identification of the bases for segmentation and determination of the important characteristics of each segment in the market.

The market segmentation of airline transport is based on the customers’ age, status, and needs. The market segmentation of airlines enables the company to know the psychographic needs of the customer and provides the company with the opportunity of formulating a good plan for the future for satisfaction of customer needs, taste, and preferences. The market segmentation of airlines include; business class and normal transport .Men’s watches are manufactured differently as they are much bigger compared to the others and they have big wrist straps. Women’s watches on the other hand have thinner wrist straps and are much smaller with several decorations. Kid’s watches are mainly made of plastic and are small. Watches according to ceremonies are often customized according to the customers’ needs or the ceremonies theme. All these customers have to be catered for to enable growth of the airline Company.

Targeting of the different customers’ needs proper evaluation of the commercial and potential attractiveness for each of the market segment. Accessibility of the market segment is an important aspect in targeting the segments. Each segment has to be accessible to enable them to receive marketing advertisements and feedback from them is also important for the company. Focusing on different benefits the segments provide is another way I would use to target the different market segments. Different market segments need different benefits and therefore focusing on these benefits will enable the company to target different customers. The profits that the company anticipate should be able to exceed the additional marketing costs due to planning. The needs for each market segment do not differ by much. Therefore, marketing messages should be emphasized for all the relevant features and benefits that are needed as opposed to one size of the watches that fit for all customer segments. This methodology is efficient for the delivery of different products for different market segments. 

By tailoring the entire marketing program through finding different ways of being unique in the market place companies are able to gain competitive advantage over its competitors. The company can establish a unique position in the market by differentiating the services, products, brand, and employees. In the competitive wristwatch market, Virgin Australia can be able to gain advantage over it rivals by using the product positioning strategy. Some aspects that can help distinguish Virgin Australia from its competitors are discussed.

Focusing on company’s market expertise for the purposes of developing market specialization is one of the important ways of gaining competitive advantage over other companies in the same business. Instead of concentrating on a wide market that encompasses transport of all types of cargo, the company can zero in on only transport of vehicles and vehicle spare parts. This would enable the company to specialize in vehicle and vehicle spare part transport and appeal to the motor vehicle industry needs and wants thus giving the company an advantage over the other companies that focus on all the market segments. Secondly, the company can make its airline services stand out as improved and new. This can be achieved by closely studying the competitors and identify how the target and solve the market problem. After careful evaluation of the competitors, the company should then ensure that they provide a unique solution to the market problem. Finally, the company should be able to leverage its expertise through establishing leadership in the market. If customers perceive the company as experts, this will transfer to the products in this case wristwatches. The company can be able to establish leadership in the technological and sales aspect of the market and with this sustain any competition from other companies. Activities such as social media marketing, article and blog writing can be used to gain leadership for the company. 

Value chain is the functions and activities that the airport or any other firm performs for the purposes of delivering valuable products and services to the market, which in this case are the passengers. It is dependent on the process of manufacturing organization as a system that is based on the inputs to the airport which are the services, the transformation process, which involves the provision of the services to the passengers, and finally the output, which are the profit returns from the services provided to the passangers.

Inbound supply chain otherwise known as inbound logistics are the first phase of the value chain because they have the earliest or first opportunity to create value. Aspects of this phase are taken as upstream activities. In this case, that is the airports the inbound logistics include the receiving the customers to the airport and selling them tickets for the purposes of travelling. Secondly, handling of the passengers for example, the airport staff then handles the passengers by offering services in the arrivals and leaving passengers areas. Lastly, the airport then provides any additional services to their customers for example through the provision of food, refreshing drinks, and even music. Addition of value to the services is achieved through maintaining high levels of consumer choice and improving efficiency in the distribution system. There is also a potential to add value by application of quality control to prevent poor services from reaching customers. Quality control also prevents unfair costs from being passed to customers and provides a good opportunity for cost reduction.

Operations involves the production elements of the airport, they are service oriented. Therefore, operations provide the second upstream aspects to allow for products and services to be offered. Some aspects of operations include ensuring the airport is operational daily according to the trading hours, maintaining proper service provision at all times, and all these services add value. There is always a potential for the airport to add value to its products and services. Expansion in terms of hours of operation in some of the branches can aid in achieving this. However, there might be some restrictions according to planning and law councils thus leading to loss of value competitively.

Outbound supply chain also known as outbound logistics in the value chain has the sole purpose of delivery of goods and services to the consumer. The airport can add value through the online booking services. Improvement of other tangibles such as till staff, luggage collectors and parking facilities help in gaining advantage competitively. When these services are improved and executed well they clearly add value through saving of customer time at the same time turnaround will increase. Addition of value concerning luggage carriers can be achieved through implementing the trolley deposit system, ensuring that they are clean, making them easily available and finally allowing quick access to and from the premises.

Marketing and sales are the downstream aspects of value chain. Introduction of club cards in the airport adds value through provision of discounts thus ensuring customer loyalty. Advertisements in the national television stations and radio stations further improves the value of the goods and services. A campaign such as lower prices or even discount offers are some of the ways airport use to obtain more customers therefore increasing profits. Loss of value in the marketing is a disadvantage that can be caused by sophistication of customers and their general awareness to the business practice. Taking this as an advantage the airport can provide customers with many recycling points and provide this information in their advertisements.

	strengths	weaknesses	opportunities	Threats
In bound supply	·         High levels of consumer choice. ·         Improved efficiency.	·         Productivity	·         Quality control. ·         New services.	·         Price changes. ·         Financial capacity.
	·         Expansion	·         Loss of value	·         Growing economy	·         Rising costs of employee salary’ that is, cost of production.
Outbound supply	·         Innovation ·         Improved customer service	·         Productivity ·         Future loss of value	·         New products and services.	·         Increase interest rates.
Marketing and sales	·         Reduced labor costs. ·         Domestic market ·         High growth rate	·         Future profitability. ·         Loss of value in the services provided.	·         New markets ·         Growing economy and demand.	·         Growing competition. ·         Technological problems. ·         Change in prices. ·         Financial capacity.

Table 1: SWOT analysis 

Improvement on the several operations and management aspects of the airline can be done in order to promote several operations and management aspects of the organization. The changes to improve the functionality of the airline can be done on the service offering aspect, quality assurance, environmental practices, human resource practices, airside management, and terminal operations.

Improvement on the services being offered by the airport include online check in and buying of tickets where the passenger books his or her flight online from anywhere as long as he can access the internet.

Human resource and marketing could be improved through provision of airline’s club cards that give discounts to loyal customers. Proper international advertising through the several media channels is another way of creation and improving marketing services of the airline.      Quality assurance can be improved through ensuring that proper maintenance to the airplanes, taxiways, runways, and airport fences.

The management can improve terminal operations and airside management by converting some of the manual services being offered into electronic services. Responsiveness to accidents can be made fast by installation of CCTV cameras in all areas and ensuring that there is ample space that will enable the emergency response team to reach the place of accident faster.  

Conclusion 

In conclusion for the company to maintain its competitive edge several aspects have been put forward in the recommendations but some of them are key. Ensuring that there is improvement in customer service and improvement of human resource and planning are the focus in the sustainability of Virgin Australia. Application of several strategies and methods such as international joint ventures, market segmentation, service and product positioning, and the differentiation strategy will further ensure the company’s sustainability in the ever increasing airlines market. 

References

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Chatterjee, K., & Gray, B. (2014). International joint ventures: Economic and organizational perspectives. Dordrecht: Kluwer Academic Publisher.

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