Virgin Australia Airlines Holdings Limited Analysis 2022

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Virgin Australia Airlines Holdings Limited: Porters Five Forces
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VIRGIN AUSTRALIA AIRLINES HOLDINGS LIMITED 2
Virgin Australia Airlines Holdings Limited: Porters Five Forces
Introduction
Virgin Australia Airlines Holdings Limited is among the leading companies involved
in transportation industry. Analysis of the macro-environment is critical as it affects its
performance and profitability. Consideration of sustainable practices such as the use of fuel-
efficient aircraft and disposing of the old ones is vital for an airline company. In this report, I
analyze the use of Porter’s Five Forces by the company for improved performance. Porter’s
Five Forces will enable Virgin Australia to make decisions on future strategies of the firm.
The report will facilitate the development of a strategic plan in the firm and the adoption of
profitable opportunities.
Porters Five Forces Model Summary
Michael Porter identified five factors that have great significance on business
profitability in its industry of operation. The model is a powerful tool to help understand the
competitiveness of a company's business environment. In addition, it facilitates the
identification of potential strategies for profitability and increased performance. The model
relates to the theory of industry structure that explains the impact industrial forces can have
on a business (Burke, Genn-Bash & Haines, 2018). Porter's model reveals that organizations
are keen on their rivals' approaches to trade that can be of threat to success. The five forces
constitute a competitive environment and can affect the profitability of a company. Thus, the
forces create competitive pressure in an industry since they are permanent in trade. The
forces include supplier power, buyer power, threats of substitutes, rivalry from existing firms,
and threats to new entrants (Bruijl, 2018). However, he encouraged firms to research on other
factors that can affect the business environment (Bruijl, 2018). The tool is critical for firms
that want to understand their position in the industry and plan on the measures to adopt. The
competitive intensity depends on various factors, such as the number of competitors in the

VIRGIN AUSTRALIA AIRLINES HOLDINGS LIMITED 3
industry, the firm's strategy, and whether a company is innovative. The marketers must also
consider the advertising resources available for the competitors, the difference in terms of
quality, and the loyalty of customers.
Application of the Model in Virgin Australia
Threats to New Entrants
New entrants emerge due to the adoption of new technologies and innovations.
Therefore, the company experiences pressure on areas such as pricing and service quality to
customers. Virgin Australia Airlines must take responsibility, manage any challenges, and
establish barriers to safeguarding its competitive edge (Pan, 2019). The company must be
innovative in producing new products and services, building economies of scale, and
focusing on research and development.
Bargaining Power of Suppliers
Every company in the transportation sector purchases raw materials from many
suppliers. However, suppliers that dominate the industry can negatively affect the profit
margins of the company. For instance, if the suppliers dictate the prices of the raw materials
and raise the price, Virgin Australia is likely to suffer losses. Powerful suppliers in the airline
industry utilize their negotiation power to raise prices of their products, leading to low profits
(Alexander, & Merkert, 2017). Virgin Australia can tackle this issue by establishing an
efficient supply chain with its suppliers. Other measures include experimenting with various
product designs and developing supplier teams for its raw materials.
Bargaining Power of Buyers
Buyers can be quite demanding since they may want to purchase the best products at
affordable prices. Customers that tend to buy at low prices can hurt a company's profitability
and performance in the long-run. The customers also want discounts and offers by the sellers,
which can affect a company's income. Virgin Australia can tackle the bargaining power of