Analysis of Airline Industry and Consumer Behavior

The provided document is an analysis of the low-cost airline industry, focusing on the impact of social media and offline influences on consumer behavior. The report includes a literature review of various studies related to the topic, such as productivity efficiency analysis of Chinese airlines after deregulation, service quality and productivity in the US airline industry, global airline alliances and profitability, airport, airline, and departure time choice patterns, competition and competitiveness in the US airline industry, straight and level: practical airline economics, and a comparative performance analysis of airline strategic alliances using data envelopment analysis. The document aims to provide insights into the key factors influencing financial distress in Indian airlines using a fuzzy AHP framework.

STRATEGIC ANALYSIS OF
VIRGIN AIRLINES

EXECUTIVE SUMMARY
The topic of the study is the strategic analysis of Virgin Airlines which includes the
identification of the key issue challenges regarding the micro and macro environment and what
impact it have that is positive and negative on the Virgin Airlines performance. It also includes
the detailed analysis with the application of PESTLE that is (political, economical, social,
technological,legal and environmental) factors and SWOT analysis to identify (strength
weaknesses, opportunities and strengths) and with Porters five force model to identify the
various stakeholders working in the environment. It also covers the potential scenario and
strategic recommendations for the Virgin airlines.

Table of Contents
EXECUTIVE SUMMARY ............................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
SECTION 1 PESTLE ANALYSES ...........................................................................................1
Section 2:- Five forces framework of virgin airlines ( micro environmental analysis)..............3
Section 3: SWOT analysis of virgin airlines .............................................................................5
4. potential scenario for the near future of the virgin airlines....................................................7
CONCLUSION ............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Strategic analysis refers to the procedure which includes researching the business
environment of the administration in which it runs as well it is very important to evaluate the
strategic planning which can result to effective decision making and efficient working in an
organisation and it analyses the strengths,weaknesses, opportunities and threats in order to
achieve the organisational objectives for the long term in an effective manner(Bigne and et.al.,
2018). Virgin Atlantic is the trading name of Virgin Atlantic airways limited as well as Virgin
Atlantic international limited and it is a British airlines which was established in 1984. it has its
headquarters situated in Crawley, West Sussex United Kingdom and the founder of the company
were Richard Branson. Another airline that is Virgin holidays that is controlled by the holding
company, Virgin Atlantic limited and from that 51% is owned by the Virgin group and 49% is
owned by Delta airlines. It has 8,875 employees and revenue is 2,689 million pound. The study
will include the strategic analysis of Virgin airlines by applying the PESTLE, SWOT and
Porter's five force model. It will also include the challenges faced by the Virgin airlines within
the micro and macro environment and its impact on its performance(Shaw, 2016).
MAIN BODY
SECTION 1 PESTLE ANALYSES
PESTLE is used to analyse the macro environment of an industry which can identify
how future trends in various aspects of the surrounding may effect the business operation of a
company. pestle is basically concerns about the external examination of an organisation(Shaw,
2016).
political analysis
it impacts on the influence of the government in terms of its policies,rules as well as
regulation on an organisation. in 2016 when Britain vote to leave the EU .as it is part of the
Brexit ,and that creates the political turmoil all over the united kingdom .virgin airlines faces a
lot of various political changes such as high costume,and also the tariff imposed by the
government .new restrictions such as deregulation of the air travel industry by the united
kingdom which allows easy entry to the other airlines resulted in the increase
competition .virgin airlines also faces the threats from the attacks of the terrorist. virgin airlines
also faced the challenging political environment in terms of the major terrorist attacks for
example- Paris as well as Brussels(Bigne and et.al., 2018).
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hence stable government provides the securities to the airlines industry so that high jack
problems can be minimised and more people prefer travelling through airlines.
economical analysis
they have to deal the problems with the high fuel prices,low cost airliners,and also the
operating as well as maintenance cost. other things such as prolonged recession ,fluctuation of
the oil prices which can impact of an organisation negatively(Snider and Williams, 2015).
moreover Brexit had an economical more impact on the airlines industry as such as virgin
airlines revenues which is generated in pounds while the expenses are in dollars which creates
the negative impact of the financial outcomes the company.
social environment
when the customers are more demanding then the airlines have to meet the demands of
the customers by stabilising the cost(Min and Joo, 2016). as there are more economically minded
passengers are travelling .,in addition to this the peal summer season difficult for virgins airlines
because of the various politician factors and they have to cancel many flights ,recently there is a
strike of five days from the air traffic control which negatively impact on the airlines. also when
it comes to the business people improved facilities such as improved communication reduced
the requirement of the fly down for the meeting(Daft and Albers, 2015).
nowadays passengers more prefer those airlines which can provided more extended
services with low fares .Automation is also another key factor which affects the virgin airlines as
people uses Skype feature for conference rather than travelling.
Technological environment
from the heavy use of the technology creates the importance of the technological factors
within the global airline industry(Hannigan and et.al., 2015) .now a days passengers can prefer to
books the ticketing through the hand -held services rather than forming the line. organisation also
conducts the advertising campaigns on Facebook and Instagram and other social platforms for
attracting more customers. technology also ensures that the flights are the lighter in weight also
provide the fuel efficiency and speed .more increased technology provides the advancement
which can gain the airlines profits by offering the safety and also the enhanced services. similarly
enhanced technological invention and innovation enable a company to improve its activities
which are resulted the operation in terms to maintaining quality and quantity of the production
of an organisation and thus increased the profits(Holloway, 2017). here in virgin group it
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provides more ultramodern machinery as well as equipments. which can increase the efficiency
as well as productivity of an organisation in term of technology. technology evolution plays a
larger role that how clients travels ,more than that,it can presents the cost cutting opportunity for
the customers ,also support the IT new support system which can deliver more personalised
services to their clients(Yildiz, Gzara and Elhedhli, 2017).
legal issues
legal factor has its own importance for analysing the various external factors of the
airlines industry .there are many rules and regulation which can impact on the virgin airlines
such as requirement to give a safe travel with the high quality services. they are also responsible
for the air crashes or any damage for the disaster .there are may laws are implemented which can
regulate that how airlines should treat their passengers.
environmental aspect
fuel has plays a crucial role in the airlines industry,airlines have to follow a invest
wisely in the fuel arena,as they use more environmental friendly and also the fuel efficient
aircraft(Douglas and Tan, 2017). the climate changes also creates an impact on the airlines ,they
are required to practice a procedure which is called as the 'green flying' follows for the protection
of the environment .
Section 2:- Five forces framework of virgin airlines ( micro environmental analysis)
Porter's five force model says that it is the tool for analysing the environment that is the
structure of the virgin airlines industry strategically depends on the five forces that are the threat
of rivalry( new entrants), bargaining power of buyers, bargaining power of suppliers and threat
of substitutes. The below brief will state the factors of five forces that will have impact on the
virgin airlines UK according to the dynamic external environment ad how the companies will
operate in this market(Yildiz, Gzara and Elhedhli, 2017).
1) Rivalry among existing industry
Existing competition is increasing in the firms and that can affect behaviour of the
companies. The firms may suffer in the market which is highly competitive due to factors like
lack of ability in terms of price and strategic actions attempt to alter the condition. If the virgin
airlines becomes successful than it can change the level in the existing market competition as
well as framework of the market. It is very difficult for the airlines to exit because the huge
amount of investment is done to enter into this sector. In case if the company wants to leave the
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sector they have to complete the contractual obligation which they have done with the
stakeholders without this airlines will not be allowed to exit this sector because the airlines only
choose to be as regulators(Douglas and Tan, 2017). Also the industry have strict rules and
regulations that means the regulators should be satisfied regarding the safety aspect in addition
with financial stability. Virgin airlines faces problems regarding the external environment that
can be very difficult for the new entrants to settle. It means that there are number of carriers or
competition for virgin airlines entering is this existing sector for making profits. But sometimes
it can be very difficult for most of the airlines to manage profits continuously this doesn't mean
that the carriers to enter into the industry has stopped. The industry rivalry is increasing very
highly and that can highly affect virgin airlines. Further concerned with the global industry there
are number of increasing cut-throat competition and carriers regarding the price wars among
shrinking passengers(Vatansever and Akgűl, 2018).
2) Bargaining power of suppliers
Power of suppliers is very important aspect over the industry that totally depends on
nature what the product will be supplied. The important question arises in the mind is the product
is made in the industry itself? The product of similar kind is available from the market? And the
value of the product at the time of manufacturing process? If the industry can produce the parts
on its own which are needed in the manufacturing process than the power of suppliers gets
decreased. In case of airlines industry the companies don't have the capability to manufacture the
components, the industry acquires the aircraft's from other company's like Airbus(Mahtani and
Garg, 2018).
3) Bargaining power of buyers
The bargaining power of the buyer is also a very important aspect but the information is not
collected regarding the buyer. The powerful buyers plays a very important source in many
markets they can deal and control as compared to suppliers in the market economy. Their is a
difference between a individual seller and individual buyer as compared to numerous buyers and
numerous sellers in the market. The presence of strong buyer can be beneficial to those markets
which have strong producers that can result to increase in sales as well as the number of seller
will be increased as well as seller concentration then the sellers together will control the buyers
power. This can be proved for what reason the delta airlines and virgin airlines have entered in
partnership(Cao, Lv and Zhang, 2015)
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4) Threat of substitutes
People who lives in west mostly travel by plane so the threat for Virgin airlines is not
high regarding the substitutes. This threat regarding the substitutes highly depends on the quality
of service that is provided in the market as well as differentiation. Now because of the recession
is going on people are shifting to other options like teleconferencing, video conferencing in order
to reduce the travel need at the time of business meetings that customers attend in different
location in plane. And people are nowadays adopting cheaper options like travelling in cruises
rather than travelling in plane.
5) Threat of new entrants
This is very important aspect which includes the current competition that can affect the
firms behaviour in the market industry. The threat of new entrants arises when the company does
not the facilities as per the changing needs and expectations of the consumers and that can
largely affect the Virgin airlines. Competition depends on the barriers regarding the entry and
exit. The barriers can be regarding the channel of distribution, exclusive technology, loyalty of
brand etc. virgin airlines does not face the threat because it is improving its quality regarding the
services to provide to customers(Tuzovic, Wirtz and Heracleous, 2018).
Section 3: SWOT analysis of virgin airlines
Virgin airlines is the leading global brand in the airline sector and it has its headquarters
situated in Crawley, United Kingdom. Virgin airlines have its parenting company which is
Virgin group. This company targets the segments according to the comfort and reliability of the
passengers and it also target the groups which includes top middle class, middle class and
business class. Virgin airlines has its positioning that it is premium airlines and it focuses on the
experience of the customers as well as hospitality(Holloway, 2017). The discussion below is
regarding the SWOT of Virgin airlines that is its strengths, weaknesses, opportunities and
threats:-
Strengths of Virgin airlines
11 Virgin airlines provides the impressive and effective services and have powerful
foundation.11 Virgin airlines have strong customer base as well as satisfied customers at the same time
it is most preferred airlines for rich customers.11 This airlines targetted passengers for one year is across 5 million.
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11 This airline is one of the greatest leading British brand and it has across 35 destinations.11 Virgin airlines use excellent and innovative promotional strategy that is advertising and
branding which is done by Richard Branson.11 It has strong brand value as well as network in north Atlantic.11 Virgin airlines have joint venture with delta that have resulted in rising revenues.11 It has high brand loyalty and at the same time it is a major premium airlines.11 Virgin airlines have employees which is higher than 8000.
111 Emergence of advanced or improved Information technology systems(Alkhatib and
Migdadi, 2018).
Weaknesses of Virgin airlines
11 Virgin airlines has poor profitability records.11 There are several competitors and have market share which is limited growth.11 Virgin airlines has limited existence globally with the rising economies.11 The company is totally dependent on Richard Branson.11 Virgin airlines have the ownership which is private.
Opportunities for Virgin airlines
1. Virgin airlines has the opportunity for expanding or increasing its routes and locations
internationally or globally.
2. It has the opportunity for accelerating its business with the other international alliances
for mutual benefit purpose.
3. The company have the possibility to enter globally by leveraging its brand existence
strongly(Escobari, 2017).
4. Virgin airlines can increase it relationship with airlines of delta.
5. The main opportunity for the company is the new runaway with the Heathrow terminal
which is major all over the world.
Threats for Virgin airlines
There are certain threats that can be difficult for virgin airlines with an increasing
competition
1. The increasing price of fuel and the ongoing changes rules and regulations
2. The major threat is the increasing labour cost that can affect the margins for the virgin
airlines to compete in the market.
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3. The another major threat is the increasing competition in the market of Europe as well as
from gulf that can be a difficulty for the Virgin airlines to survive for the long term.
4. The threat of curb traffic that can arise due to Brexit impact(Hannigan and et.al., 2015).
5. Virgin airlines can face threats like hurricane disruption and the troubles regarding the
engine.
6. The airlines can face the threats regarding the confrontation among unions.
7. The threat of overcapacity from north Atlantic.
8. The threat or risk that can occur to all the airlines through geopolitical events like war
between countries, natural calamities and terrorism(Choi, Lee and Olson, 2015).
From the above discussion it has briefly analysed the SWOT strengths, weaknesses,
opportunities and threats for Virgin airlines regarding the internal as well as external
performance that can impact positively and negatively the company in order to survive in this
competitive market for the long term(Min and Joo, 2016). Virgin airlines have certain
competitors like Air India, Qatar airways, Malaysia airlines, Qantas airlines, Singapore airlines,
British airways, Turkish airways that the company can compete by utilising the strengths, by
correcting the weaknesses, by accepting the opportunities and by minimising the threats this can
result to increase in profitability, brand value, brand loyalty, strong customer base, brand
presence as well as can grow and expand in various destinations like middle east, Asia, Latin
America etc.
4. potential scenario for the near future of the virgin airlines
people want to fly .demanded for the air travel is double in next twenty years.
virgin airlines has a strong brand reputation which will definitely impact in the future
scenario .due to its punctuality,quality and speed it became the popular and maintains its dignity
in the near future. it loyal customers enhances its brand values also with the help of the social
media platform which is enhancing its value day by day impacts the future as new generations
followed the social media more religiously(Yildiz, Gzara and Elhedhli, 2017). this airlines gives
the luxury at the cost effective price. most of the customers buy tickets at the affordable price ,an
airline which is cost efficient and maintains quality is also remembrance for the passengers.
they also provide the unique branding as well as advertising made it popular for the future
references. innovation plays the most crucial role in terms of the future as though innovation
airlines can innovate their products and meet the requirement of the customers in present and the
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future references. as though the economic condition of all over the world is increasing
rapidly(Tuzovic, Wirtz and Heracleous, 2018).in the recession of the united kingdom lowc cost
so that the people are also economically satisfied and want to spent their money in the
development of their own,for travelling in airlines reduce their time as they invest their more
time in another important works unlike the days spending in the other transport. so that 's why
will impact the positive impact on the airlines revenue and gains the business of the virgin
airlines more profitable. also industrialisation is also increases so that the more people are
travelling for the business purpose and this also led to provide more airports within the
country,virgin airlines congesting the more airports .so that the people do not faces the shortage
of the air ticket in the future .by planning and leading for changes that all lie internationally
accepted as a smarter through that regulation of the principles and also the government also
ensured that the economies as well as societies will reap the benefits of the increased
connectivity.
In future virgin airlines expand its business in the developing countries like India so that
it can earn revenues from the developing countries. it can also work for the minimising the
connecting files so that it can take less time and being more efficient in the future references,so
that more people will be attracted towards it. the future of the airlines are also affected by the
drivers of change that may affect the data which can be under the Radardarta privacy are the
major factors as it can measures as well as analyse all the information about the customer's
experience as well their privacy so that it can be save from the problems like High jack
in the future airlines needs are more concern about the airport planning is the key for the
recommendation emerging future to improve the efficient use of the of that ability and also the
guard against the revenue commitment as well as the market allocation .as airport are not only
the departure part but offers the dinning ,as well as shopping and much more. technology is
playing the important role as mentioned above
future of the virgin airlines mainly focused on the privacy as well as trust
SECTION 5
PORTER'S GENERIC STRATEGY
porters generic strategies determine the direction or strategies of an organisation. Michael porter
uses the four strategies for an organisation(Douglas and Tan, 2017). according to Michael as
company should be clear to able beat the competitors in the market. the basis of theory depends
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on the three strategies such as cost leadership, differentiation and also focus. latter cost focus and
also the differentiation are divided.
there are the four generic strategies of the porter
cost leadership
it is a term which is used when a company projects itself in terms of the cheapest
manufacturer as well as provider of a specified product in a market at the lower most prices for
the competitors in the market. it is very difficult to spread the strategy
this strategy's main objective is to become the lowest cost producer within an
industry(Vatansever and Akgűl, 2018) .the company can sell it product either at the lowest cot
or an average market to gain the higher profit than the other rivalries ,or they can sell the product
below the average industry so that they can gain in the market share .here the company can
maintain the some profitability while some other competitors suffers losses .the cost leadership
usually targets a broad market
there are some ways which can improve the cost advantages are by improving process
efficiencies and also gaining the unique access to a lager gaining source of the lower cost
materials ,in addition to this ,making optimal outsourcing as well as vertical internation decisions
or by avoiding some of the cost together(Mahtani and Garg, 2018). if the competing company
are unable to their cost by the same amount ,then the company can be able to sustain a
competitive advantage which is based on the cost leadership.
company that are successful in the cost leadership have following internal strength
more efficient distribution channel
expertise are of high level in the manufacturing process
high skill in designing products for the efficient manufacturing
each generic strategy has its own risk including the low cost strategy(Cao, Lv and Zhang, 2015).
differentiation strategy
it is a strategy used for the development of as product as well as services that can offers
the unique features ,which are more valued by the customers in terms of the value .this strategy
makes the product m,ire exclusive and also make it more attractive for the customers as compare
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to the other products which are offered in the market. this strategy requires a good research as
well as development ,also the innovation and the ability to deliver the higher quality of goods
and services(Tuzovic, Wirtz and Heracleous, 2018). here effective marketing is needed so that
the market also understand the benefits of the product which company can offer. more
importantly it is to be flexible can adapt the change in the market very quickly .for that an
organisation should me more focused on the outside world and also posses the creative approach
.value added to the products allows the company to charge the premium price for the
uniqueness of the product. company hopes that the higher prices are more than the extra cost
incurred while manufacturing the product. because of its uniqueness ,if stakeholders increased
the prices than the company may easily pass along the cost to their customers(Alkhatib and
Migdadi, 2018).
focus strategy
` focus strategy basically highlights in the lowest possible price by targeting the focused
or little market either to achieve the cost advantage or the differentiation. a company which is
using the focus strategy can also enjoy the customers loyalty to a higher degree. because
company can focused the narrow segment market ,they pursuing a focus strategy that have lower
volumes and thus less bargaining power with suppliers of their company(Escobari, 2017).
however firms posses the differentiation focused strategy which can able to pass the higher cost
to their consumers.
company that are successful in a focus strategy are able to build the wider range of the product
development strength associated to the narrow segment or focused market that is now by them
very well .cost focus is same as the cost leadership except that it is focused on one specific
market which is average cost(Choi, Lee and Olson, 2015). instead of selling the goods to
everyone ,there is only focussed to sell a small part of the market which are majorly focused on
buying a unique product. differentiation strategy are focused to the cost focus except that the
going to work in the niche or narrow segmented market while trying to sell the goods on the
quality basis.
Porter's strategy can be used by the virgin airlines. through porter generic strategy airlines think
about the overall positions of the company in terms of the advantage and overall growth(Shaw,
2016)
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CONCLUSION
From the above case study it is concluded with the detailed analysis of virgin airlines by
applying PESTLE analysis in order to identify external key drivers of change which were
(political, economical, legal, social, environmental and technological) and their impact or
influence on Virgin airlines, SWOT analysis that identified the internal factors ( strengths and
weaknesses) as well as external factors ( opportunities and threats) in order to determine the key
stakeholders in the airline industry and PORTER'S five force model which has included the
( rivalry industry, threat of substitutes, threat of new entrants, bargaining power of suppliers,
bargaining power of buyers) to analyse the micro environment within which the company
operates. Further it has also given strategic recommendations and potential scenarios for the near
future and the various challenges faced by the Virgin airlines within the immediate environment
(competitive airline industry and larger macro environments (trends beyond the airline industry)
and their impact on the performance of the Virgin airlines in the competitive environment in
order to make the organisation achieve the objectives effectively and efficiently for the long term
growth and success of the Virgin Airlines which can result to increase in brand value , brand
loyalty, reputation worldwide.
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REFERENCES
Books and Journals
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industry: a service quality-adjusted DEA model. Service Business. 9(1). pp.137-160
Daft, J. and Albers, S., 2015. An empirical analysis of airline business model
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Escobari, D., 2017. Airport, airline and departure time choice and substitution patterns: An
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Min, H. and Joo, S. J., 2016. A comparative performance analysis of airline strategic alliances
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Shaw, S., 2016. Airline marketing and management. Routledge.
Snider, C. and Williams, J. W., 2015. Barriers to entry in the airline industry: A
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Statistics. 97(5). pp.1002-1022.
Tuzovic, S., Wirtz, J. and Heracleous, L., 2018. How do innovators stay innovative? A
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Vatansever, K. and Akgűl, Y., 2018. Performance evaluation of websites using entropy and grey
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Yildiz, B. C., Gzara, F. and Elhedhli, S., 2017. Airline crew pairing with fatigue: Modeling and
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