Discuss about the Business Strategy Report for Virgin Airlines.
Virgin Airlines is the strategic business unit as well as a subsidiary of UK highest private organization (Virgin Group). This group is currently presented in different verticals of business. This report emphasizes over the Airline industry. This specific group includes around 32% of the local market share in Australia. The headquarters of the company are located in Queensland, Australia, and it undertakes its operations in around 20 cities of Australia and even has more than 60 Boeing Aircrafts, which are in operation.
Strength- Virgin brand is prevalent among 98% of the British public. Customers expect best customer services in different class business or economy. The company has adopted innovative technology, like movies, flight music, games, etc.
Weakness- the weak point is its flight delays that need to improve for bringing efficiency in flight. Its travel areas are also limited (Kotler, Scheer and Kumar, 2000).
Opportunities- Strategic marketing of the company make use of innovation, maintain values and develop quality. It offers internet connection in flights.
Threats- Recession has impacted the whole airline industry, as the same lead to cancellation of bookings, and created risk for flying customers (Kotler, Scheer and Kumar, 2000). The company face threat from dilution of the brand through rapidly expanding the brand image, and even emphasize over essential items.
The primary financial resource of Virgin Airlines is its fleet of Airbus and Boeing jets. In the year 2007, every Virgin Airlines had gained the profit of $5 billion. Mainly for Virgin America, the Virgin Group had invested around $312 million in raising the company and keeping it running. In case of Virgin Blue, Branson had earned around $500 million when the company was made public (Kotler, Scheer and Kumar, 2000).
Virgin had employed around 50the, 000 employees around the globe that had resulted in the attractive and excellent culture. The culture of Virgin initiates the empowerment of staff so that the work could be undertaken innovatively following the right quality service. The culture also started the customer care and value for money, that’s the reason resources were expected to meet the requirements of the customer. Virgin Airlines human resource department is highly a responsible for choosing the correct employees that hold proper behavior, to complete the task productively and brand value is also attained. Brand value includes the teamwork as well as rewarding the sales representative in order to generate sales (Miller, 1992). It is essential that human resource department should choose the employees with correct behavior, to improve the brand value that finally supports in creating a brand culture of the company.
The first and foremost competency is its innovative and stylish experience of flying that they offer at low cost. It is analyzed that, this competency is highly valuable, as it’s considered as the base for gaining customers. They are also able to initiate low fares as they can fly only at the particular time as well as high traffic routes that are expected to go profitable. As Virgin Travel is considered as the young business of airlines, its fleet of both Airbus and Boeing jets is entirely new (Prahalad and Hamel, 1990). Therefore, its fleet holds the current technology for the enjoyment of flyers and advantage for the environment. The jets newness form a rare quality as compared to airline companies. For the similar reason, this constitutes extraordinary competency, and it even makes it highly inimitable. For the famous airlines firm like American Airlines and Delta, purchasing new planes to replace the old one is highly costly. In reality, it’s difficult to replace all the old airplanes and still earn profits.
The experience of flying for Virgin Travel is still quite non-substitutable. They provide various facilities like free internet on the flight, costly MP3 library, live TV, leather seats for each passenger, video games, cabin lighting, on-demand food and drinks and many more (Prahalad and Hamel, 1990). In comparison to Virgin Airlines, only Jet Blue is close to them, because the fleet is very new and they even provide certain amenities. The other core competency is related to their customer service and friendly environment. The mission statement of Virgin Travel is to become a profitable organization, where people are interested in shopping and where people are interested in working. In the present time, friendly environment and excellent customer service is a rare quality in the airline sector. Airlines are regularly getting canceled, delay and many cases of baggage loss are heard (Prahalad and Hamel, 1990). The mission statement of Virgin Airline is rare, and their ability to offer a friendly environment and excellent customer service is appreciable.
Distinctive competencies are the implementation of new technologies and skills that permit the company in passing on advantages to end customers. Virgin Airlines enjoy the reputation of their strong brand, and there are various customers around the UK, where it is noted that people highly appreciate the Virgin brand. The company always ensure to initiate and advertise the current developments and activities of the company in the best likely manner. The staff also enjoy a high level of empowerment, and the same permits them to become proactive and help them in serving the customers as per the particular requirements (Prahalad and Hamel, 1990). The firm also enjoys the advantages of corporate structure, management success, style and respective resource value. Virgin Airlines also offer enough customer value through providing dynamic characteristics, such as in-flight meals and web check-in facility. The implementation of low-cost strategy provided through the company is quite phenomenal. They also offer low airfares and therefore, they can easily attract the massive group of cost-sensitive clients (Prahalad and Hamel, 1990). They also offer point to point facilities that assist them in minimizing the price of providing extra services, such as transfer of luggage.
The operational price is less than permit the cost offered to the end customers. The companies apply the special kind of aircraft, and the same enable them in minimizing the cost of training, its maintenance as well as replacement parts that can be purchased in whole and therefore, it also reduces the cost of buying the similar spare part in vast quantity. They also focus towards retaining the previous staff through regularly rewarding them and enhancing their efficiency through motivating them (Prahalad and Hamel, 1990). The management of Virgin is highly committed to hiring and training the flight attendants, pilots, and maintenance staff. They all work towards maintaining the aircraft as per the industry standards of top international of airlines.
Both the financial and human resource are the strength of the company, as it offers them with base to initiate the actions. Human resource is the asset of the company, because business performance depends on their performance. Human resource supports the company in coming up with innovation and creativity. The company always ensure to initiate and advertise the current developments and activities of the company in the best likely manner. The foremost competency of the company is its innovation and stylish experience of flying at low cost, which support the company in gaining competitive advantage.
The airline sector is primarily highly regulated through the government, and there are even many laws, which help in examining, where airlines can fly, services provided by them, planning, policies, strategies and pricing (Ragins and Greco, 2003). To make airline exit in business, it is essential for them to follow to the regulations and rules. Therefore, compliance is a single factor, which impacts the Virgin Airlines
There are many operational restrictions related to political factors. A unique way to overawed all these limits to have a connection with the national carriers (Ragins and Greco, 2003). Therefore, political considerations should have the high influence over the operating environment of airline sector.
Virgin Airline work around the international borders; therefore, it’s important that they adapt to the practices that suite as per national and international laws along with domestic rules and regulations of the aviation industry. The way in which competitors often react towards the share of new markets might also include the political influence (Ragins and Greco, 2003). When Heathrow Airport was opened in the United Kingdom for Virgin Airlines, they diminish the rules of London Air Traffic distribution and move towards the BAA donations towards conservative Party, which got halted. Virgin even had to incur the Lord King wrath, when they make use of unused slots that was held through the BAA at the International Airport of Tokyo and the same was awarded to Airlines (Ragins and Greco, 2003).
Cost of fuel and recession, as well as various other economic factors like price incurred on empty seats, often play a key role that impacts the Virgin Airline activities (Porter, 1980). Strong/weak home currency, as well as international economic markets, create influence over the travel price (Virgin Atlantic, 2014). In the worst situation, company’s economic situation might reduce cost on the travel, and it might even discourage the staff from taking on the flight. The rise in the fuel cost might also force the Virgin Airlines to quickly transfer the price to the end customers by creating challenges for the people to easily afford it (European Monetary Policy, 2014). Any oil cost fluctuation will directly affect the currency that later on the effect the flying cost for Virgin Airlines.
The international airline, like Virgin Atlantic Airlines, provides different nations requirements to understand both cultural and social values of the location that are served for successfully driving the business (Virgin Atlantic, 2014). Both the cultural and social values encompass every aspect related with analyzing the particular requirement of the location, central holidays and right arrangements, which are taken into account while meeting out the particular destination requirements (Fojt, 2006). For instance, choice of the meal needs to be restricted for the non-pork, relying on the foods that service Muslim countries to ensure that sentiments don’t get catered and business is driven to its location (Virgin Atlantic, 2014).
Technology offers the modest benefits to businesses, and there is also a rise in demand for applying latest technology so that it can initiate the customers to gain better experience (Virgin Atlantic, 2014). Holding the right application of e-commerce to offer customers with a portal to buy tickets, along with rapid check-in services online that can meet the demand of young and tech-savvy customers. Nevertheless, Virgin airlines are expected to make sure that they don’t get highly reliant over high-end technologies because the same might result into the isolation of particular groups, which are not comfortable in applying high-end technologies (Virgin Atlantic, 2014).
Environment concern has also become a problem because the airline industry is getting notorious and key polluter. Various campaigns have strained to tranquil the environmental lobbies, but still more efforts should be placed for projecting the organizational image (Virgin Atlantic, 2014). Virgin had put its focus towards informing the customers about the pollution caused through CO2 by every flight. The bags offered at duty-free are also composed of an important part of the recycled material.
People residing in the west usually travel through air and therefore, the same create threat on substitutes, which is not high in case of Virgin Airlines (Nijssen and Frambach, 2001). It is important to remember that in effect of the recession, there are various business fliers that hitherto apply the fly and they had started considering the multiple options, such as virtual meetings, teleconferencing, and these type of things might impact the requirement to fly down the partners and customer locations for business meetings (Chamberlin, 2009). Apart from these, there exist various noticeable trend in current years, which had started reducing the leisure travel and its substitutes with the cheap alternatives, such as budget cruise as well as slow tourism that usually entail the less dependency over the aircraft travel.
The exit and entry barriers in case of the aviation industry are high, and the same can be seen through the fact that it might take colossal capital to move in this sector. Besides that, airlines cannot quickly exit this sector, when they select the controllers, who usually claim in meeting the contractual obligations towards stakeholders when they are interested in exiting the venture (Gillespie, 2009). Besides this, the aviation industry is highly featured through the strict regulations and various rules that implies the regulators to be satisfied with the multiple aspects of safety along with financial stability as well as airworthiness of the carriers (Solis, 2011). This implies that entry barriers are usually formidable and therefore, Virgin Airlines had to come across external environment threats, which is quite challenging for the new entrants (Gillespie, 2009).
It is identified that aviation industry is highly drenched with more carriers getting enter in this industry for the purpose of exploring profits. Though it’s quite the different matter, airlines fail to manage the earnings in consist tent manner, which is not deterred for carriers to enter in this sector (Gillespie, 2009). That’s the reason, it is mention that industry rivalry is high and the same impact the Airlines. Nevertheless, as far as international aviation industry is concerned, there is an ongoing race among carriers for the reducing passengers that had resulted into war and competition (Pettinger, 2010). Besides this, the rivalry among the airlines usually leads towards consolidation as the considerable mantra and lack of profitability also drive the aviation industry towards the mergers (Gillespie, 2009).
If there exists any force, then it will have high amount of effect on Virgin Airline; it’s the buyer’s power due to the airline industry necessary for the market of buyers due to plethora selection, intense kind of fare war and looming of low-cost threat carriers moving the market share for rivals (International Flight Rules and Regulations, 2010). Of course, Virgin Airlines is of low cost by the fact in current years, there are various airlines that had imitated successfully their business model by undertaking the fliers. Besides that, regulators selection to lean over buyer’s side, instead of airliners, Virgin Airlines had to understand the flyers and defer them, else they might lose the market share (Hill and Rifkin, 2000). Apart from this, the rise in the channel of distribution by the flyers can also purchase the tickets as well as minimization of the intermediary layer with the online booking proliferation through airlines that implies buyers can quickly spoil the selection (Coco, Jyoti, and Mark, 2010).
The carrier suppliers such as Virgin Airlines is the aircraft makers like Airbus along with the companies of aviation fuel as well as handling vendors and base support. Nevertheless, the suppliers also cover the spare airline parts, referring the fact that aviation industry is featured through the existence of some carriers and various suppliers vying the business (Coco, Jyoti, and Mark, 2010). It’s of no surprise that supplier’s power is less and airlines usually have high hand over a communication with suppliers. Besides that in the case like jet fuel supply, Virgin Airlines has different benefit, due to the cost of fuel and premium items, which implies that various buyers create favored customers for the companies of aviation fuel (Coco, Jyoti, and Mark, 2010).
As Virgin airlines are famous for its low fare and services, it is highly suitable towards the category of best price leader, as they provide stress over the low-cost ticket along with strategies that focus towards differentiation (Furrer, 2016). Though the starting investment of the company was high, they have been promoting the company as the low price aircraft, holding reliable, quick options to roadways, sea, and rail. If they provide flights having low cost, but try to maintain the quality, then there are more chances that it might raise the customers.
Due to the rapid expansion of the internet using customers, it has assisted Virgin Airlines to reach out more customers without leading to any extra cost (Wit and Meyer, 2010). The operational price of Virgin Airlines is high, and that’s the reason, its crucial strategy is to sell the unsold tickets having less fare as well as offering the customer services and in-flight entertainment (Rifkin and Matthews, 1999).
The business model of the company applies low-cost competitive base, with the less fare rate. It is essential that aircraft should focus towards the online technology and marketing to minimize the operational price (Hill, Schilling and Jones, 2016). Timing is critical in the context of travel.
The services offered by the Virgin Airlines are highly efficient and reliable. There are various competitors of Virgin Airlines, but nevertheless, the airline is able to make its position in market and had even develop its brand name (Hill, Schilling and Jones, 2016). The Virgin group is viewed as restructurer; this implies that it holds less median price due to its small corporate center, which contains less involvement in the level of business.
The virgin group holds the massive range of strategic business units that relate to many airways to offer drinks (Branson, 2016). The corporate rationale of Virgin Airlines is that they are trying to be more static in the market, where there is less competition and customers fail in getting value for money.
Conclusion
It’s analyzed from the above sections that Virgin Airlines had applied two primary generic strategies such as differentiation and low cost. Experts in this field had mentioned that organizations should go with the generic strategies to attain the best level of efficiency in their business. Nevertheless, Virgin Airlines had also proved that this theory has changed in present time and it has gone more contingent as per market needs and available options.
References
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