Collusion between Virgin Atlantic and British Airlines in Response to Increased Oil Prices

This case study explores the reasons why Virgin Atlantic and British Airlines might collude in response to increased oil prices. It also examines whether the market was conductive to collusion and discusses how to determine whether illegal behavior occurred. Additionally, it considers other possible explanations for these events.

Assessment

Table of Contents
CASE STUDY 1..............................................................................................................................1
Explain why Virgin Atlantic and British Airlines might collude in response to increased oil
prices. Was the market conductive to collusion or not?..............................................................1
How would you determine whether illegal behaviour actually occurred? What might explain
these events other than illegal behaviour?...................................................................................2
Explain the dilemma facing the two airlines as well as their individual executives...................2
CASE STUDY 2..............................................................................................................................3
What positive externalities were common to both Silicon Valley and Route 128? What
positive externalities were not common for both? Explain.........................................................3
What factors made Silicon Valley such a fertile place for startups? How did these factors
interact with one another? What inhibited startups in Route 128?..............................................4
In hindsight, what could Apollo Computers have done to maintain its advantage in
minicomputers? What does this tell you generally about research clusters?...............................5
REFERENCES................................................................................................................................6

CASE STUDY 1
Explain why Virgin Atlantic and British Airlines might collude in response to increased oil
prices. Was the market conductive to collusion or not?
The major reason for Vrigin Atlantic and British Airlines to collude in high competitive
environment as well as changes in oil prices. Due to increase in oil prices affect the performance
of long haul airlines as they are especially vulnerable to oil price hikes. Collusion is the strategy
that is adopted by both of the firm in order to increase its profit as well as survival for longer
term (Madar, 2015). British Airways was the dominant company which have larger share which
is between 50 % to 100 % on the routes of London and different cities of America. British
Airways was the leading organisation in airline sector and its major competitor is Vrigin
Atlantic. High completion between both of the firm lead to have direct impact on organisational
functions as well as decision making. when oil prices were increase British Airways has plotted
levy fuel surcharges on passengers. In this case British Airways first introduces surcharges that is
$ 8.25 on long haul flights in which barrel of oil trade is about $38. British Airways has includes
the surcharges by six time in 2006. In this oil traded is about $ 69 and surcharges that was around
$ 115. During this time Virgin Atlantic has also increased it surcharges same as British Airways.
This was due to beat British Airways organisation and gain competitive edge over other rival
company. From this it can be determined that market was conductive to collusion impact over
other of the firm and profitability. Collusion can be describe as the secret and illegal cooperation
with the motive of deceive other. Virgin Atlantic has increased it surcharges according to British
Airways organisation as the strategy of British Airways will lead to have impact on performance
and sales of Virgin Atlantic (Mills and Helms Mills, 2017). For survival in respective market
area as well as increase profits, Virgin Atlantic has increase it surcharges form passenger. Due to
increase in oil prices both firm were affected and by conducting collusion market of organisation
will be able to perform business activities and increase it profits.
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How would you determine whether illegal behaviour actually occurred? What might explain
these events other than illegal behaviour?
As per the above case it can be determined that the illegal behaviour of organisation has be
occurred. British Airways has drastically increase the surcharges from this customer in order to
over come the rise in oil prices. The rivalry between two firm that is British Airways and Virgin
Atlantic lead to engage in dirty tricks in order to drive business (Lange And et.al., 2015). For
increasing organisational profits and earn larger share in market British Airways has increase
surcharges due to increase in oil prices. When British Airways has enhance surcharges for haul
flights up to six times from passenger then this can be consider as illegal practices that is
performed by organisation in order to earn more profits. Oil fuel trading is about $ 69 a barrel
and the surcharges that charged from passenger is about $ 115. It has been determined that this
illegal practice will lead to have major impact on customer as this charges lead to increase in
airline tickets. By conducting collusion market both firm that is British Airways and Virgin
Atlantic has increase the charges of long haul flights with the motive of earning more profits.
Through this it can be easily determined that both firm has performed illegal and punishable
behaviour for accomplishing their selfish motives. This illegal practice lead to have direct impact
on customer and full filling their needs. High competitive environment lead to increase in these
practice as British Airways and Virgin Atlantic has conducted collusion market in order to
perform illegal practice as well as attain more and more profits.
Explain the dilemma facing the two airlines as well as their individual executives.
The dilemma British Airways and Virgin Atlantic is faced about the increase in
surcharges as well as creation of collusion environment. Both firm individual executive is in the
dilemma that they should perform these activities or not. They have understood that it is illegal
practices which have impact on society and customers. Heavy charges form customers is a legal
and punishable activity under U.S law. The major dilemma of both firm and its individual
executive is regarding the firm benefits and following law. If organisation does not increase
surcharges for long haul flights that will lead to have direct impact on performance and
profitability of organisation. Rise in oil prices will lead to lower the profits of airline business as
well as increase in cost of organisation. Virgin Atlantic organisation and individual executive is
in dilemma of blowing whistle or not. Both of the firm has increase the surcharges and according
to law both firm in punishable. If Virgin Atlantic executive blow whistle then it will not only
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affect the British Airways about also have impact in respective organisation. This a difficult
situation that is faced by organisation as Virgin Atlantic is fear of American regulation. It has
been determined that the law and regulation of America is more tougher in anti competitive
behaviour as compare the United Kingdom. Illegal and criminal behaviour of companies will
lead to have impact on its performance as well as brand image of organisation (Ustaomer,
Durmaz and Lei, 2015). But as per regulation of US if organisation confess the practice before
getting caught then there are high chance of immunity and less punishment comparatively.
Virgin Atlantic organisation have conduct while blowing practices in order to stop illegal
practices and heavy surcharges form passenger. Acceptance is the only way to protect company
and as a result of whistle blowing executive of Virgin Atlantic get immunity from United States
and United Kingdom. But the executive of British Airways were subjected to Prosecution in both
countries.
CASE STUDY 2
What positive externalities were common to both Silicon Valley and Route 128? What positive
externalities were not common for both? Explain.
There are various positive externalities that were common in both Silicon Valley and
Route 128. These positive externalities were very supportive in enhancing the performance and
capabilities of these area. Both of these areas are consider as birth of clusters to education and
skills. Positive externalities that were common in these area is that institutions were improving,
technology capabilities as well as openness to capital market (O'Mara, 2015). All of these factors
were common in both area that will lead to increase their potential as well as significant impact
over Silicon Valley and Route 128. Both countries were using new and innovative approaches
for enhancing their market area as well as focusing in developing strong companies. In both
Silicon Valley and Route 128 country, institutional structure was every strong and this lead to
emphasis in high tech companies. Through this talented students and employees are
accumulated for this type of environment and support in improvement in Silicon Valley and
Route 128 countries.
Apart from different common externalities in both Silicon Valley and Route 128 it has been
determined that there are few difference or positive externalities which were not common for
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both of these. The major difference that has been identified in these two clusters is related to
difference in approaches that is used for organizing firm. Both of these cultures is using different
method and approaches in order to organize firms and this will lead to have impact on their
performance of firms. In this cluster Silicon Valley firms are considering exclusive approaches
for conducting research as well as designing of company products. This will lead to provide
more accurate and information data about market and customer needs for creation of product.
The firm of Silicon Valley are contracting with specialized firm in order to conduct production
activities (Engel, 2015). Contracting with production will help in enhancing the performance of
company as well as creating products of high quality. This support Silicon Valley in
accomplishing economies of scale. Where as the cluster of Route 128 is tends to work by
considering verticall integration. In this cluster firms are focusing in improving their
performance by managing and combining whole chain of business operation together. This
includes combination of process that start form researching about products to designing of
products. In this process organization is developing product in same firm in order to increase the
quality of product as well as earning more profits. Silicon Valley cluster leads to fluidity of
employees in the areas along with this the firms will come up with new and innovative ideas to
create products and perform task. In contracting with Route 128, firm were more focused on
commitment to lifetime employees as well as guarding innovation of business with the motive of
remaining competitive.
What factors made Silicon Valley such a fertile place for startups? How did these factors interact
with one another? What inhibited startups in Route 128?
There are various factors that support in Silicon Valley in fertile place for startups.
Silicon Valley cluster is one of the best area for start up organization as this helpful for
organization to easily conduct business operation in Silicon Valley. The major reason that is
consider for Silicon Valley in becoming the fertile areas for startup is the researcher estimate that
is provided to small and medium size firms. This areas has right skills and talent to start new
business as well as figure out rich idea for conducting innovative business. Silicon Valley area
high coverage of academia, private sector as well as government which support in improving
start up organization activities Silicon Valley area is helpful in creating environment that have all
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essential element that is required for start up business. High density of wealthy investors and
funding institution support in effective performance of organization.
All of these factors are interacted and connected with each other as they support in effective and
efficient performance of organization. High investment and funding support organization to
accurately implement business activities as well as consider innovative technology in
performance of firm. Right and talented employees are able to use new and advance technology
in more effective manner that will to foster in performance of business.
The main reason for inhibited startup in Route 128 is the vertically integrated
corporation. In this system all firms of these cluster is in performance these own function which
is related to research, designing of products as well as production. This system of industries are
focusing on independent companies in order to keep them large. This can be consider the as
major reason for inhibited startup in Route 128.
In hindsight, what could Apollo Computers have done to maintain its advantage in
minicomputers? What does this tell you generally about research clusters?
Apollo computers was one of the top organisation in creation of mini computers. In 1980
Apollo organisation was enormously successful in workstation engineering . Most of the
products of this organisation was supervised by Sun company which was started two years after
Apollo. Both of these two companies were facing neck to neck completion but after mid 80’s
Apollo fell behind (Etzkowitz, 2019). This organisation should have developed its own
department for supervising products as well as provide better quality of products as compare to
other rival companies. This would have support Apollo computer to gain competitive advantages
over other rival companies. Apollo company was working in self sufficiency based structure that
lead to have impact in its quality of products as well as its products were incompatible.
Through this research clusters it has been determined that it is crucial for organisation
develop products which is specialised as well as able to meet with the needs of different
customers. This will help in creating industry that is more skills and capable in specialized are of
developing products. Industry culture of Silicon Valley was supportive in developing effective
environment for start up as well as creation of specialized products.
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REFERENCES
Books and Journals
Madar, A., 2015. Implementation of total quality management Case study: British
Airways. Bulletin of the Transilvania University of Brasov. Series V: Economic Sciences, 8(1).
Mills, A.J. and Helms Mills, J.C.H., 2017. Digging archeology: postpositivist theory and
archival research in case study development. Insights and Research on the Study of Gender and
Intersectionality in International Airline Cultures. Bingley: Emerald Publishing, pp.93-109.
Lange, K. And et.al., 2015. Changing business models and employee representation in
the airline industry: A comparison of British Airways and Deutsche Lufthansa. British Journal of
Management, 26(3), pp.388-407.
Ustaomer, T.C., Durmaz, V. and Lei, Z., 2015. The effect of joint ventures on airline
competition: the case of American airlines, British airways and Iberia joint business.
O'Mara, M.P., 2015. Cities of knowledge: Cold War science and the search for the next
Silicon Valley (Vol. 111). Princeton University Press.
Engel, J.S., 2015. Global clusters of innovation: Lessons from Silicon Valley. California
Management Review, 57(2), pp.36-65.
Etzkowitz, H., 2019. Is Silicon Valley a global model or unique anomaly?. Industry and
Higher Education, 33(2), pp.83-95.
Wonglimpiyarat, J., 2016. Exploring strategic venture capital financing with Silicon
Valley style. Technological Forecasting and Social Change, 102, pp.80-89.
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