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Business Strategy Of Virgin Atlantic Airways Tourism Essay

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The strategic analysis review shows a comprehensive insight in to the company. To evaluate strategic analysis of a company, the general idea comes that what strategic planning does the company take as well as different analysis and the implication of modals and recent strategic techniques? Strategic planning refers the future steps that how the company plan to implement the strategy. To investigate the company strategy and planning one needs to evaluate the external and internal factor in focusing on some definite theory and tactics related to the nature of the organization, the related theory and concepts well as approach to that very company or organization. This report statement aims to evaluate the recent strategies direction followed by the Virgin Atlantic Airways.

Virgin Atlantic Airways Ltd (Virgin Atlantic) is one of the famous small airways in Aviation Company providing long haul air service globally. It has joint venture with Singapore airlines (49%) and Virgin group (51%).it also cover 30 recognized holiday destination with 38 airs from Heathrow and the other destination.[company Information, cited, 03/11/2010. http://www.virgin.com/about-us] In the first step explains the organization’s mission, vision and objectives after that critically evaluate the several strategic theories relating to business planning followed by external and eternal analysis like SWOT, Porter’s five forces, seven s model, different strategic planning modal, Strategic concepts, BCG Matrix as well as Virgin Atlantic managing risk, Strategy and ethics of virgin Atlantic, Strategic and Operational conflict etc. This report will help to formulate strategies to the business including customers and competitor better.

Virgin Atlantic founded in 1984.Company Slogan-Mine’s Bigger Than Yours, Four Engine Four Long-haul, No Way BA/AA, Still Red Hot For 25 Years approximately 8,993 employees & 3,000 Cabin crew (2010).Virgin Group is defined in their corporate website [1] as a “branded venture capital organization”, the Group’s values being “value for money, quality, innovation, fun and a sense of competitive challenge”, and its mission to “deliver a quality service by empowering our employees and we facilitate and monitor customer feedback to continually improve the customer’s experience through innovation”. Virgin Atlantic operate the flight from London Heathrow to other destination to New York, Los Angeles, San Francisco, Washington, Boston, Miami, Chicago, Tokyo, Hong Kong, Johannesburg, Cape Town, Nairobi, Shanghai, Delhi, Mumbai, Lagos, Mauritius, Sydney, and Dubai, as well as from Gatwick to Orlando, Barbados, St Lucia, Antigua, Las Vegas, Grenada, Tobago, Cuba, Montego Bay, and Kingston[strategic-analysis-review, online[cited] 13/11/2010,available http://www.companiesandmarkets.com/Summary-Company-Profile/virgin-atlantic-airways-ltd.-strategic-analysis-review-319320.asp?prk=65c93e403f38ca36ab62c36704cb0186]

The red-hot destination of virgin Atlantic that cover so many destination in the world as the people spend their money for annual leave. According to Virgin Atlantic web site, following are the red-hot destination:

Flights to the USA

Fly to a city on the East coast, or lie on a beach on the West coast or Florida.Our USA destinations are waiting for you to discover

Flights to the Caribbean

The beautiful islands of St Lucia, Grenada, Tobago, Barbados, Antigua and Jamaica all have a beach for you to stretch out and unwind on, and if the beach isn’t your thing there’s Havana to chill out in. 

Flights to Africa

From stunning Cape Town to the delights on offer in Johannesburg, Lagos and Nairobi Virgin Atlantic is a great way to fly to Africa.

Flights to Asia

Virgin Atlantic fly to some destinations, none more so than Shanghai, Hong Kong, Tokyo, and Dubai all of which never cease to amaze visitors. Then there is diverse Delhi to explore.

Flight to Australia

Sydney has it all, famous sites, fantastic shops, beaches and a wild nightlife. [1]

Virgin Atlantic route map

Red hot Destination of Virgin Atlantic 1.0

1.4 Mission, vision and objectives of Virgin Atlantic:

The mission statement of Virgin Atlantic Airways is very specific and clear. First mission according to the Virgin Atlantic web site is ”To grow profitable airlines” the second mission is ‘Where people love to fly’ and the last mission is ‘Where people love to work’

The vision of virgin Atlantic is also crystal clear “our vision is to fulfil the potential demand of the customer and make their journey comfortable and also set the standard for others in the airlines industry. “Cited by [virgin Atlantic website]

The objectives of the airlines is to become the most popular and unique airlines across the globe.

2.0 Strategic concepts of Virgin Atlantic:

Strategies are statements of how objectives are to be achieved. These are usually long- term strategies and necessitate many different approaches. Virgin Atlantic always concentrates highly on their innovative product and service development for instant new in-flight innovation. Virgin Atlantic makes joint venture with other airlines to their web globally. in differentiation strategy virgin is unique as they provide the in flight music, ice-crème, games, child featuring as well as movies. Recently Regus inks strategic alliance with Virgin Atlantic and gold and silver flying club etc .low cost generic strategies are remarkable for that airlines as it follow the other r airline to compete with and give the offer to their customer, focus strategy is characterized the competitive orientation of virgin Atlantic. In order to remain profitable, Virgin Atlantic makes their main focus on its core competencies. The company is currently concentrating in sustaining strategy of great quality service and maintaining relation with upper class customer in particular.

2.1 SWOT Analysis of Virgin Atlantic:

SWOT is a method for strategic planning that is used to evaluate the definite company or venture s strength weakness, opportunities and threats. SWOT entails identify the internal strengths and weakness and the external opportunities and threats, after completing the analysis the external environment and internal resources etc, to formulate corporate, business and financial strategies of the organization, strategic decision maker need proper information. Generally SWOT refers the comparison of strength, weakness, opportunities and threats. By SWOT organization can utilize the strength in order to capitalize the opportunities, counteract threats as well as remove the internal weakness

2.1.0 Strength:

Strong brand name and well established reputation and 98% of British public

Consumers expect first-rate customer service in each definite class Business/Economy.

Introduction of innovative technology in flight like music, ice cream, games and movies

Differentiator

Holiday service provider

New innovation offered to the gold cup member and J class with lounges including high quality food and service

Strong organisational structure and trained employee.

Famous founder Richard Branson and his innovative entrepreneurial management.

business class offers more service and competitive prick

Strong partnership with Singapore airlines because they are the marginal investor.

Return is higher and value is great as their load factor is better than competitors

2.1.1 Weakness:

Marketing focused on holiday and business destination

Flight delays need to improve efficiency

Limited routes and destination

After the September 11 tragedy some are cut like Chicago, Toronto, and Cape

Relatively small aircraft fleet

Ineffective alliances

No Preferential landing slot in Heathrow

Richard Branson is a one man manager being the proprietor and administrator of various decision maker of multiple company

2.1.3Opportunities

Alliance and mergers

Afro- Asian market expansion

More holiday destination Caribbean islands

Weaker competitors in us market

In flight internet connection and ecommerce

Web site need to be improve and web site navigation

Additional routes are generated

We are flying into outer space is Virgin galactic

Virgin use the warehouse facility in Heathrow

Recession may be unexpected advantage for investment

2.1.4 Threats:

Budget airlines

Structured market

Ongoing supply surplus

Natural calamities (volcanic eruption, storm .etc)

Recession ,September 11th will and has affected the whole industry

Brand Dilution by a rapid expanding brand image

Competition for routes British and United airlines

Fuel prices are fluctuating, which accounts for 15% of total airline expense.

2.2 PEST analysis of Virgin Atlantic:

The essential thing for organization is to consider the environment before starting marketing process. The fact is that environment analysis should be continues and feed all aspect of development. The following steps of PEST refers the external analysis respectively the political, the economical, the social and the technological analysis

In political environment analysis of Virgin Atlantic includes the government intervene, goods merit, the taxation policy, new interest rate, The Air Miles scheme is not considered as a taxable perk by the government .the stability of low and the government position on marketing ethics, policy of economy that affects the company as well as the govt view on culture and religion

Secondly economical side Virgin Atlantic consider increasing fuel cost, recession congestion and other environment restriction including higher security and insurance cost and inflation employment level per capita. Virgin Atlantic always considers the trading economy both long term and short

In social environment Virgin Atlantic keep eye on different cultural aspect, seasons offer as well as career attitudes etc. social and cultural influence vary from place to place that why VA keep eyes on attitudes of customers in different region .

The last factor, which has a vast impact on strategic planning, is technological, considering this Virgin extant the technological advancement such as internet on distribution and cost synergies, web-page development all IT solution, e marketing and advertising [PAST, online, cited 04/11/2010, available on http://marketingteacher.com/lesson-store/lesson-pest.html]

2.3 Porters five forces for Virgin Atlantic:

The Porter’s five forces is an uncomplicated but influential tool to realize where control have in a business situation, It helps to understand both the strength of the company’s present competitive position, and to reach the goal where the company move in to. To this analysis one company can take opportunity of the situation of strength, progress the situation of weak point as well as avoid taking wrong steps.[porters five forces, online 03/11/2010,cited available on http://www.mindtools.com/pages/article/newTMC_08.htm]

Porters 5 forces modal: 1.1

2.3.1 The power of suppliers:

Aircraft manufacturer is obviously the prime supplier’s in Aviation Company so in case of Virgin Atlantic their major airline supplier is Boeing and Airbus. Another key supplier of aviation is fuel companies as fuel is basic necessary for operating the aircraft. For the engineering help airport make the support for Virgin Atlantic and for IT solution, IBM and NCR can be classified. So for virgin Atlantic the supplier power in remarkable.[Case study of Virgin Atlantic marketing strategy. Cited, online, date 03/11/20 available on http://www.slideshare.net/grace12691/virgin-atlantic-case-study]

2.3.2 The threat of entry:

Airline Industry is flooded more than five airlines established for same kind of service providing and they also hardly compete to each other in market. Virgin Atlantic airways, a company with good background in the air industry and they are also backed with Singapore airlines. Virgin Atlantic has already invested high fixed cost. Product differentiation is one of the main reasons to bar new entrants. Normally, new entrants are reluctant to enter an industry when it needs high capital requirements. [Case study of Virgin Atlantic marketing strategy. Cited, online, date 03/11/20 available on http://www.slideshare.net/grace12691/virgin-atlantic-case-study]

2.3.3 The power of Buyers:

Virgin Atlantic has a reputation and is known as quality service provider to their c customers. They always think about the ability to afford of customer and offer the cheapest airfare. Customer can buy ticket directly from company without any help of agent’s .Bargaining power is very low, but now virgin have the distribution channel everywhere to keep up the competition for instance, air ticket. Various offers provided to attract more customers, product differentiation will become the core competencies.[Case study of Virgin Atlantic marketing strategy. Cited, online, date 03/11/20 available on http://www.slideshare.net/grace12691/virgin-atlantic-case-study]

2.3.4 The threats of substitutes:

For every company, product or service always have a potential of a substitutes for it. The switching cost of customer is relatively low although virgin Atlantic customer has strong relation with the company; the main substitute is British Airways routes and united routes .British airways have long and short haul flight as the same destination as well as united airways provide same destination as like as Virgin Atlantic, But virgin Atlantic always give priority to their upper class customer.[Case study of Virgin Atlantic marketing strategy. Cited, online, date 03/11/20 available on http://www.slideshare.net/grace12691/virgin-atlantic-case-study]

2.3.4 Competitive rivalry:

In the whole Europe Virgin Atlantic has the same strength as like as the Southwest airlines In US. Virgin Atlantic has many equals competitor and they offer equally attractive product and service but virgin always give concentrate on their upper class and premium level customer, which is different from others. in time to time Virgin Atlantic give their customer different types of deals and offers and virgin Atlantic do the offer that no other company give that type of offer, so it’s a strength for itself. The Major competitive rivalry for Virgin Atlantic is BA/AA [Case study of virgin Atlantic marketing strategy. Cited, online, date 03/11/20 available on http://www.slideshare.net/grace12691/virgin-atlantic-case-study]

2.4 The effect of 7s model in Virgin Atlantic:

McKinney’s 7s models contain some factor/variable that is hard otherwise soft element.

7s Model & Virgin Atlantic

Structure

Strategy

System

Shared values

Staff

Skills

styles

Implementation of 7S on VA

Known as value based management

Differentiation Strategy

Helpful for internal analysis

Important to manage strategies

7s model in Virgin Atlantic 1.2

Virgin Atlantic provides a quality service to empower the employees; Branson is capable of handling and developing each of the business from the inception of the company and the approach, which was taken by, the attention for the skilled employee first, proper motivated employee will perform better and properly understand customer needs and expectations

For instance, Branson spend most of his time while travelling on Virgin Atlantic with the cabin crew, talking to them and stays on landing in the same hotel, he always prefer his employees within a team, the style of Virgin is unique one can find how the Virgin Atlantic style to see the advert of VA. Maintaining proper corporate culture, Virgin becomes the winner of red hot up to 25 years.

Recently Australia able to get expand to a new rout for VA, as they consider, this is very profitable low cost airlines and they always try to keep the airfare low. 12 months ago Branson set their team the following challenges:

First, to target a profit of 100 million for Virgin Atlantic.

Secondly, he asked the management to keep faith with the public by keeping costs low so they could keep fares low.

Thirdly, Virgin has to make sure to keep the youngest fleet in the world.

Fourthly, challenged with the task of achieving the best EBITDAR* per plane of any airline in the world. For interest, Ryan Air still has the best EBITDAR margin in the industry at 36%. However Virgin Atlantic is a much younger and smaller airline with only 30 planes/average age 1 year as opposed to 9 years Ryan Air.[ Virgin-airline-case-study,online,cited,02/11/2010 available online http://www.docshare.com/doc/188317/Virgin-airline-case-study]

2.5 BCG modal of Virgin Atlantic:

BCG modal theory divides the product under four specific group, stars, cash cows, question marks and dogs respectively. Star refers SBU’s with high share or high growth market. In terms of Virgin Atlantic Airways there is no space in stars, upper class section is cash cow denotes high share low growth rate. This high end product targets wealthy customers and business passengers. This is the highest estimate ticket offered, generally around $9,000, and there are 50 seats available in this

class. Therefore, upper class generates much upper revenues compared to premium

BCG Modal for Virgin Atlantic 1.2

Virgin Atlantic Premier class customer are in SBU’s Dogs as for low market share and low growth rate Virgin Atlantic’s economy class may be explain as a dog. Question marks are SBU’s that have high potential but will require great resources to build market share. Premium Economy is a question mark as it has potential to be a cash generator. There are 38 seats in this class and tickets generally sell for around $3,000.Economy class focuses on families and groups flying together. Tickets for economy class are priced around $500 and there are 271 seats. Premium economy targets cheaper flying business class passengers and high-end couples [Case study of virgin Atlantic marketing strategy. Cited, online, date 03/11/2010 http://www.virgin-atlantic.com]

3.0 Managing risk and virgin Atlantic:

Virgin Atlantic is exposed to various risks specially the financial risk. The market risk covered the foreign currency risk, interest risk as well as fuel price risk further more credit and liquidity risk. The current rescission and the other risk as for example natural calamities. The impulsiveness of economic growth and keep eye on to minimise manageable adverse effects on the Group’s financial performance.

Risk management strategy is really very simple in VA. The risk is segregated in different small sections so that one failure does not bring the group down.

To control the impact the fuel price risk the group fuel price risk management strategy was taken by Virgin Atlantic so the company have no problem and have protection against the sudden change or increase of global market jet fuel price on the other hand ensuring that company have no worry in serious for the price falling of Jet fuel. Foreign currency risk is involved in fuel risk and liquidity as if the currency rate market up and down, automatically some dispute created between payments both buyer and seller. For current recession 600 virgin staffs are losing their job[virgin atlantic.com] Reiner Siebert: He was working for Virgin Atlantic at the time of 9/11 and realised that the airline industry needed a co-ordinated response. “I contacted everybody I knew working for UK aviation companies, and invited them to sit down and discuss what we were going to do.”[Direction for risk mangers.cited,online-02/10/2010, http://www.strategicrisk.co.uk/Journals/Newsquest/StrategicRISK/June_2010/attachments/LessonsSR10.pdf

In hazard risk of virgin Atlantic including cargo loses, 3rd party liability, political instability in different countries make risk for the company, weather and different environmental hazards like recent Volcanic ass create a big issue for all air company Europe.

Operational risks in virgin Atlantic come from more tactical side of day-to-day business for instant crew scheduling, accounting, information and e-commerce.

Many airlines have processes in place to alleviate the most obvious operational risks (e.g., business disruption and IROPS), but fail to deal with more delicate risks. For example, little attempt has been put into working with the government to shape industry guideline or explain capacity issues, yet airlines have spent tens of millions of dollars fighting inquiries and lawsuits, all the while incurring system delays. Operational risks can be alleviated through organizational solutions. [Managing risk.cited,online10/10/2010avilableon http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1074404839 ]

4.0 Strategy and ethics of virgin Atlantic:

All Virgin Atlantic Info staff and members are required to abide by this Code of Conduct. It is also intended to provide guidance for volunteers. To treat the other people with respect, being honest and ethical dealings with each other [both staff and customer] no practice or tolerate discrimination on the basis of place of origin, ethnicity, citizenship, gender, age, political or religious affiliation sexual orientation, marital status no practice or tolerate discrimination on the basis of place of origin,[Virgin Atlantic Info, cited ,online,2 November 2010 http://www.virginatlanticinfo.co.uk/Virgin_Atlantic_Info:About]

5.0 Strategic and Operational conflict:

In terms strategy and operation, action was taken according to plan by Virgin Atlantic to improve their corporate objectives. In operation effectiveness they do things better than the previous one and rivals. For strategy planning did different things for different rivals in particular.

Both of the aforementioned categories are regularly significant for success. policy intending to carry a fit between its property and potentials and the atmosphere within which it functions, this protected reasonable benefit which others could not copy and helped create better financial charge in assessment to its opponents.

Operational improvements were bringing on from beginning to end customer centre, quality of service, punctuality. This was done in order to approach to customer satisfaction.

Recommendations:

Conclusion:

Virgin Atlantic is definitely booming by the year 2010 and ready to make additional change in order to continue the constant expansion of the business. In terms of building customer Trust, consistency, reliability, legendary and customer care, going extra mile to achieve satisfaction of customer is important for go ahead, Strategy to compete with “Budget Flights “Being innovative. Safety all the way etc need to refine for the better for further in Virgin Atlantic.

6.0 References:

http://www.mysmp.com/fundamental-analysis/ebitdar.html

[0] Robert M. Grant, “Richard Branson and the Virgin Group of Companies in 2007”

[1] http://www.virgin.com/about-us/

[2] http://www.virgin-atlantic.com/en/gb/allaboutus/missionstatement/index.jsp

[4] http://www.virgin-atlantic.com/en/gb/ourdestinations/index.jsp

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