Management: Analysis of Virgin Atlantic Airlines using PESTEL, SWOT, McKinsey's 7S and Porter's Five Forces

This document provides an analysis of Virgin Atlantic Airlines using PESTEL, SWOT, McKinsey's 7S and Porter's Five Forces. It includes a detailed evaluation of the macro and internal environment, competitive edge, and appropriate strategies for improvement.

Running head: MANAGEMENT
Management
Name of the student
Name of the university
Author Note

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Table of Contents
Introduction......................................................................................................................................2
LO1 Analyse the impact and influence which the macro environment has on an organisation......2
LO2 Assess organisation’s internal environment and capabilities..................................................6
LO3 Evaluate and apply the outcomes of an analysis using Porter’s five forces..........................10
LO4 Devise appropriate strategies to improve competitive edge..................................................13
Conclusion and recommendation..................................................................................................18
Bibliography..................................................................................................................................20

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Introduction
Virgin Atlantic Airways Limited is a British airline with the headquarters in Crawley,
United Kingdom (Virginatlantic.com 2019). The strategic context that can be taken into
consideration includes the fact that the fleer size of 46 is considered as one of the highest in the
world (Virginatlantic.com 2019). The fact that the company uses a fixed fleet consisting of
Airbus and Boeing provides the company with an expansion strategy (Virginatlantic.com 2019).
The airline is known for indulging in day-to-day flights across the world and seasonal flights
both of which provide Virgin Atlantic Airlines with the permit for travelling with customers as
well as goods (Virginatlantic.com 2019).
However, one of the drawbacks of Virgin Atlantic Airlines is the fact that it had seen a
significant amount of employee turnover in the recent years (Virginatlantic.com 2019). The
mission statement of Virgin Atlantic Airlines is to provide top quality flight services to the
customers (Virginatlantic.com 2019). The vision is to improve the current level of employees
and increase the base of operation within the next five years so that increase in profit-making
activities can take place (Virginatlantic.com 2019). At the same time, the aims and objective of
Virgin Atlantic Airlines is to ensure that it remains as one of the most productive and reliable
airliner in the world (Virginatlantic.com 2019).
LO1 Analyse the impact and influence which the macro environment has on an
organisation
The application of the PESTEL analysis can help to determine the macro environment
forces and the impact it may have on an organisation. PESTEL refers to the macro environment

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factors such as Political, Economical, Social, Technological, Environmental and Legal factors.
According to Michalak, Rahwan and Wooldridge (2017), the PESTEL analysis takes into
consideration some of the important as well as key factors that are essential to be taken into
account for the expansion of a market. Macro environment considerations include a large part of
the society and the microenvironment. The analysis of the macro and microenvironment is done
in order to identify the necessary changes that are required to be made based on the strategies. As
stated by Booth (2016) it can be used as a method to conduct a macro environmental scan so that
the components of strategic management can be can be implemented. In the case of Virgin
Atlantic Airlines, the application of the PESTEL analysis can help the company to understand its
potential in the business. Virgin Airlines uses these techniques and tools to ensure that strategic
direction and business growth is attained. The application and the use of PESTEL are provided in
the table. This includes:
Category Political Economic Social Technologica
l
Legal Environment
Factors Policies of
Governmen
t
Taxes
Inflation
Interest rate
Demograph
y
Culture
Life style
Technical
advancement
Innovation
Legislations
Laws
related to
employment
and
sustainabilit
y
Environmenta
l regulations
Management
of wastes
Impact on
business
The
political
The
economic
The social
environment
The technical
advancement
The legal
laws related
The
environmenta

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environmen
t across the
world can
fluctuate
based on
the
Governmen
t impact
that exists
in the
countries. It
can be seen
that in the
case of
Virgin
Atlantic
Airlines,
the political
environmen
t in London
can be of
assistance
for the
condition of
London is
stable and
thus, can
help in the
financing
the airline.
It can also
be said that
improvemen
t needed for
increasing
the base of
operations
or for
expanding
its
dominance
can be done
based on the
economic
strength that
exist in
of London
can be
considered
as
supportive
as well as
the social
environment
of the
destination
countries. In
this regard,
it can be
said for
Virgin
Atlantic
Airlines, the
social
support can
help the
customers
and the
community
in the field of
airlines needs
to be applied
by Virgin
Atlantic
Airlines so
that the
company can
remain
updated in the
technological
side. It is
necessary that
Virgin
Atlantic
Airlines
import
technical
changes so
that the
company can
continue to
provide the
to flying
commercial
and
passenger
jets are
relaxed in
the United
Kingdom
and in the
United
States.
However,
laws related
to
employment
and other
HR policies
are strict in
the United
Kingdom.
Therefore, it
is necessary
that Virgin
l regulations
are strict in
the United
Kingdom,
and so a flight
company like
Virgin
Atlantic
Airlines need
to ensure that
it maintains
such laws.
The law
include
reducing the
amount of
pollution so
that the
company can
maintain its
Arial
business. This
also involves

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company.
However,
the
destination
countries in
which the
flight is
directed at
can create
major
problems
for the
company
and in the
process can
hinder any
chances of
progress.
Thus, the
political
environmen
t can pose
huge threat
London. In
this regard,
it can be
said that for
Virgin
Atlantic
Airlines, the
economic
condition of
the source
country can
be
considered
as one of the
best for the
developmen
t of the
company.
can be
considered
as strength
for the
company. It
is necessary
to
understand
the manner
in which the
social
environment
of Virgin
Atlantic
Airlines can
contribute
for its
development
. Based on
this, it can
be said that
Virgin
Atlantic
best and
comfort travel
experience to
the customers
Atlantic
Airlines
comply with
such laws
and at the
same time
abide by the
Governing
rules that
are
established
in other
destination
countries
regarding
landing the
flight and
any rules
related to
political tie-
ups
using
sustainable
mode of
travelling so
that
customers can
remain
comfortable
during the
flight hours.

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for Virgin
Atlantic
Airlines
Airlines can
have proper
support
from the
society
Time
frame
Indefinite Maximum
for 3 months
About 3-5
months
Till technical
update
6-12 months Cannot be
applied
Type of
impact
High High Medium High Medium Medium
Rate of
impact
Increasing As per
overall
economy of
country
Cannot be
determined
May cause
damage
Undesirable Harm
Importanc
e
Unfamiliar Important Critical Essential Severe Unknown
Table 1: PESTEL analysis
(Source: Virginatlantic.com 2019)
LO2 Assess organisation’s internal environment and capabilities
The business balance scorecard is a strategic performance management tool that consists
of a semi-structured report. According to Phillips and Moutinho (2018), the managers imply the
use of the business balance scorecard so that they can maintain a record of the activities that are
undertaken by the employees at an organisation. At the same time, as stated by Eisenberg,

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Johnson and Pieterson (2015) the control and monitoring of the employees can be done so that
the capabilities can be identified. The balanced scorecard takes into consideration four aspects,
which include the financial, internal process, customers and the organisational capacity. For
Virgin Atlantic Airlines, the application of business balance scorecard includes:
Aspect Focus KPI example
Financial Increase in the revenue per user so
that an improvement can be made on
the profit making abilities. Operating
costs need to decrease so that
expansion can be made
Return On Investment and
Operating system
Internal process Make improvement in the offering
selection so that information services
can be improved. The innovated
manner of availing services can help
in the ease of use for the End Users
New innovative services and
reduced cost units
Customers Improve the clarity of
communication and ensure that
demands are met. Improve the
perception about the company and
provide proper end user experience
Level of return and service
rating
Organisational capacity Increase the base of operation and
expand in terms of gaining more
employees. Improve the technology
Retention of employees and
increase of base of operation

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and the content supply of the
resources
Table 2: Business Balance Scorecard
(Source: Virginatlantic.com 2019)
Based on the analysis of the business balance scorecard, a SWOT analysis can be made
which can help to relate the internal environment with the vision of Virgin Atlantic Airlines and
its capabilities.
Strength
 Strong foundation and efficient services
 The most preferred airline with over 5
million passengers per year
 Excellent advertising and innovative
branding
Weakness
 Severe competition
 Limited market share
 Limited global presence
Opportunity
 It includes a major presence in the
world
 Leverage its strong brand presence for
global penetration
 Can increase the number of routes and
destinations
Threat
 Rise in the fuel costs and changes in the
regulation to aviation
 The rise in the labour costs can affect
balance margin
 Increase in competition in the European
market
Table 3: SWOT analysis
(Source: Created by author)

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According to David, David and David (2017), the application of McKinsey’s 7S model
can help to understand any type of internal changes in an organisation. The application of the 7S
model can be done to ensure that the goals set by an organisation be achieved. In the case of
Virgin Atlantic Airlines, the application of McKinsey’s 7S model can be done to understand the
internal capabilities of the organisation and link it with the objectives. The application of
McKinsey’s 7S includes:
Strategy Structure Systems Shared
values
Skills Staff Style
The purpose of
Virgin Atlantic
Airlines is to
maintain its
number one
status and ensure
that it complies
with the
requirements of
the customers so
that competitive
advantage can be
enhanced
The division
of activities
which
includes
coordination
between
various
departments
such as sales
and
technological
departments
need to be
maintained so
that
Feedback
of the
customers
can be
monitored
and the
reward and
resource
allocation
can have a
proper
system in
the
business
Fundamental
values and
concepts
underline the
principles of
the culture of
the
organisation.
The values
of the
organisation
are shared by
the
employees
The core
competencies
includes
distinctive
capabilities
so that
promotion of
its concepts
and flight
innovations
can take
place
Managing
the human
resource as
one of the
main
concerns
of Virgin
Atlantic
Airlines is
the fact
that it is
involved in
huge
turnover
Manage the
behaviour
pattern of
each of the
customers
so that
strategies
can be
made based
on the
demands of
the
customers

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expansion of
the business
can take place
Table 4: McKinsey’s 7S analysis
(Source: Virginatlantic.com 2019)
The factors identified here can help Virgin Airlines to grow and expand in its overall
business and at the same time ensure that competitive advantage is gained. For example, the
application of the SWOT analysis can help Virgin Airlines to understand its internal strength in
the market. The factors that affect the 7S strategy identify the manner in which Virgin Airlines
can guarantee its existence in the market and focus on the needs of the employees. Therefore, it
can be said that these strategies can help Virgin Airlines to continue with the development and
growth of its business in the current business market.
LO3 Evaluate and apply the outcomes of an analysis using Porter’s five forces
The application of the Porter’s five forces can be considered in order to evaluate the
competitive intensity that exists in an organisation. According to Bock et al. (2016), the Porter’s
five-force model can help to analyse the impact each threat can have on the prospects of an
organisation. The advantage of Porter’s five forces is that it helps in understanding the threats
that exist in the market and help in making progress. At the same time, the disadvantage of the
use is that it takes into consideration only one industry and thus, does not focus on other external
factors. The overall outcome of the business strategy includes the identification of the threats so
that proper application of the business models can be identified. The application of Porter’s five-

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force analysis for Virgin Atlantic Airlines can be analysed to identify the threats that the
company need to deal with:
Industry rivalry Bargaining power of
suppliers
Bargaining
power of buyers
Threat of
substitutes
Threat of new
entrants
The industry rivalry
is high as Virgin
Atlantic Airlines
faces stiff
competition from
other companies in
Europe. The diversity
of the competitors
can help in the
development of the
industry and ensure
that Virgin Atlantic
Airlines can enhance
its resources in the
business
The bargaining power
of suppliers is medium
since Virgin Atlantic
Airlines have a good
reputation in the
market. The company
can gain stable support
from engineer firms for
aviation equipments
and technologies. At
the same time,
investors are also the
partners of the
company hence,
financial supply is also
strong
The bargaining
power of the
buyers is medium
as Virgin Atlantic
Airlines since the
innovative
services provided
by Virgin Atlantic
Airlines is unique.
However, a low
level of threat
remains which
may have a
negative impact on
the development
of the company.
The threat of
substitutes is
also low, as the
airlines are
considered as
the fastest mode
of travel
available in the
modern world.
Hence,
substituting it
can be low as
opportunities
for comfortable
and quick travel
will be lost
The threat of new
entrants can be
low, as any new
companies may
not use the
innovative
technologies that
are used by
Virgin Atlantic
Airlines. Thus,
apart from the
competitors
Virgin Atlantic
Airlines does not
have to worry
about other
companies in the
business
Table 5: Porter’s five-force analysis

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Market
Products
Market
penetration
strategy
Diversification
strategy
Product
development
strategy
Market
development
strategy
Existing
Existing New
New
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(Source: Virginatlantic.com 2019)
At the same time, the application of the Ansoff matrix can help to understand the
competitive edge that can be determined in an organisation. As stated by Blanco and Cohen
(2017) the Ansoff matrix can provide an understanding of the market segments that can be used
for future growth of a company. The advantage of the Ansoff matrix is that it can be used to
focus on market planners and at the same time can help in expecting any risks. The disadvantage
includes it fails to show market development and diversified strategies. The overall outcome of
the business strategy can be that it is one of the most used strategies while trying to identify
market growth for new and old business. In the case of Virgin Atlantic Airlines, the application
of the Ansoff matrix can be considered to understand the market position that is held by Virgin
Atlantic Airlines. The analysis includes:
Figure 1: Ansoff matrix

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(Source: Virginatlantic.com 2019)
Market penetration strategy For Virgin Atlantic Airlines, the market penetration strategy
needs to include gaining a firm foothold in Australia and
South East Asian countries. For this the strategy can be to
establish another base of operation in either of these regions
so that communication can be enhanced
Product development strategy The product development strategy may include enhancing the
technological competence and the innovative idea. For
example, sustainable development of the product need to be
maintained so that Virgin Atlantic Airlines can continue with
the development of its strategies and ensure that customer
satisfaction is obtained via the products
Market development strategy Market development strategies include identification of the
market in which future business can take place. This can be
considered as a new strategy that is to be developed so that
Virgin Atlantic Airlines can undergo processes related to
changes in the market abilities of its systems.
Diversification strategy Diversification strategy includes the diverse products that
exist. Virgin Atlantic Airlines can include not only the
passenger flights but also the commercial flights so that it can
maintain a firm foothold in the aviation industry. With the
diversity of the products Virgin Atlantic Airlines can gain
advantage in countries that deal with only commercial

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products
Table 6: Ansoff matrix
(Source: Virginatlantic.com 2019)
LO4 Devise appropriate strategies to improve competitive edge
Along with this, Papulova and Gazova (2016) identified that the VRIO analysis can help
in identifying the marketing and competitive edge that can be gained. The advantage of the use
of VRIO is that it can help in understanding the value that exists in the market. However, the
disadvantage is that it is considered as one of the most used tool and does not provide analysis of
the competing market. The overall outcome of the business strategy can be that VRIO is used to
identify the value of an organisation. For Virgin Atlantic Airlines, the application of VRIO
analysis can help to understand the value provided by its products to the customers along with
the rarity it has in the market. The rate of imitability of the products or services and the manner
in which it can be organised are analysed by the VRIO framework. The analysis of Virgin
Atlantic Airlines by implementing VRIO includes:
Resource or
capability Valuable Rare
Imitable or
non-
substitutable
Organised
or exploit
Impact on
competitive
advantage
Ability to use latest
technology for
innovation Yes No Yes Yes
Realised
sustainable
competitive
advantage

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Conducting both
passenger and
commercial flights Yes Yes No Yes
Realised
competitive
parity
Ability to retain
employees Yes No Yes Yes
Realised
temporary
competitive
advantage
Table 7: VRIO analysis
(Source: Virginatlantic.com 2019)
An example can be given in the manner in which Virgin Airlines have managed to gain a
competitive edge over its competitors. It can be seen that earlier Virgin Airlines did not use latest
technologies to monitor the aircraft and hence any system failure required immediate landing.
However, with the advent of technologies, automatic solution to any form of problem can be
made that can help Virgin Airlines to continue with the development of its activities and ensure
that customers are not aware of any type of disturbances. However, before the implementation of
the VRIO analysis, it is necessary to analyse the value provided by the stakeholders. In the case
of Virgin Atlantic Airlines, the stakeholder analysis consists of identifying the important
stakeholders of the company and the manner in which it can be effective for the growth of the
company. The stakeholder analysis of Virgin Atlantic Airlines includes:

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Power
Interest
Keep
satisfied
Manage
closely
Monitor Keep
informed
Customers
Employees
Government
Investors
Partners Supplier
s
Owners
Manager
s
Communities
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Figure 2: Stakeholder analysis
(Source: Virginatlantic.com 2019)
Stakeholder Description Importance Power Interest
Owners The owners include
the founder of the
company, i.e.
Richard Branson
The duty of the owners is to
delegate tasks to the workers and
manage the resources
High High
Managers The manager include
the immediate boss
of the department
leaders, i.e Shai
Weiss (CEO) and
The managers take care of the
employees and report to the owners
in case of any discrepancy in the
organisation
High High

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Peter Norris
(Chairman)
Employees Virgin Airlines
consists of 8,875
employees
The employees aim to meet the
objectives of the organisation as
well as that of the self to remain
motivated
High High
Customers It has over 5 million
passengers on a
yearly basis
The customers are considered as
the loyal parties and provide the
necessary feedback for growth
High High
Investors Virgin Group which
consists of 51% and
Delta Air Lines
which include 49%
Investors help with the financial
assistance so that the organisations
can conduct innovative ideas
High Low
Suppliers Suppliers include
engineering firms
that specialise in
aviation devices and
technologies
Suppliers help by providing
resources essential for growth and
development
Low Low
Government Support received
from the London
Government
Government provide any form of
legal resistance that can hamper the
progress of the organisations
High High
Partners Virgin Group and
Delta Air Lines
Partners act on the interest and the
investment made for the company
High High
Communities Society people of The communities are the people High High

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London and
Manchester, flying
club
that form the society of business
Table 8: Stakeholder analysis
(Source: Virginatlantic.com 2019)
Conclusion and recommendation
Hence, based on the analysis, conclusion can be drawn that for Virgin Atlantic Airlines to
succeed in the competing business environment, it is necessary that the company conduct a
macro environmental analysis, which can help it to gain knowledge about the business. The
application of different models of analysis can help Virgin Atlantic Airlines to maintain their
status as the top-flight airline in England. The company faces stiff competition from other
airlines but due to the support from the partnerships and the investors, the company have been
able to remain at the top of the flight industry. The support provided by the stakeholders and the
internal strengths of the company can be considered as appropriate for its growth and
development. However, despite these advantages, Virgin Atlantic Airlines also face various
threats and have certain weaknesses that are required to be recommended.
One such weakness is that Virgin Atlantic Airlines has limited presence in the global
market. Despite various types of flight services and destinations that cover majority of Europe
and North America, Virgin Atlantic Airlines lacks presence in the Asian countries and Australia.
Improving the financial condition of the company can help in plotting a course towards Australia
and at the same time, can improve the number of operations for Virgin Atlantic Airlines.

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At the same time, one of the aims of the company is to become the most reliable airliner
in the world. This can be achieved by ensuring that Virgin Atlantic Airlines employ latest
technologies and remain concerned about the safety of the people. Sustainability via the
reduction of air pollution can be reduced so that it becomes a reliable and sustainable source of
flight for the customers. Thus, it can be said that implementation of such changes can help Virgin
Atlantic Airlines to maintain its stature as the number one flight airline company in London.

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