Strategic Management & Leadership : Virgin Airlines

Strategic Management &
Leadership

Table of Contents
INTRODUCTION................................................................................................................................3
EXECUTIVE SUMMARY..................................................................................................................3
MAIN BODY.......................................................................................................................................3
Section 1. PESTEL analysis........................................................................................................3
Section 2. Porter's 5 forces model analysis.................................................................................5
Section 3. SWOT of virgin airlines.............................................................................................7
Recommendations.....................................................................................................................10
CONCLUSION...................................................................................................................................11
REFERENCES...................................................................................................................................12

INTRODUCTION
Strategic Management involves framing of main strategies and plans in line with the
business major goals, objectives and aims. All the strategies formulated are implemented as per the
core business aims. Strategic management is related with the process of making continuous plans,
its monitoring, analysis, evaluation for determining any changes or modification required or not.
With the help of strategic leadership, strategies made are utilised for managing the employees of
organisation. Strategic leadership defines the potential of a manager in defining vision for the
business firm thereby motivating employees so as to accomplish it in better and effective manner.
The present report is based on Virgin Airlines which is one of the British Airlines carrier started in
1984. It is considered as one of the best air carrier in terms of quality, speed, punctuality. This report
will focus on macro factors having influence on working of company. Further, analysis will be done
of micro environment factors with the help of Porter's 5 forces model. At last, it will shed light on
determining all the strengths and weaknesses by doing SWOT analysis on the business operations
of Virgin Airlines.
EXECUTIVE SUMMARY
Virgin airlines has come up with its first business loss in the last four years i.e. £48.5 million
net loss in the year 2017 as compared to £187.3 million net profit in previous year. As a result
company has to face many economic, operational as well as significant challenges for surviving in
this tough competition market. The problem was arises because of difficulty in Roll – Royce
engines which has power its Boeing 787 Dreamliners and thus has weaken pound thereby affecting
the demand in the UK market (Virgin operational and economic challenges, 2017). It has affected
the cost making disruption so much that Virgin Airlines is required to group up its four aircraft
while under repairing situation. Also, it has resulted in leasing of some of its additional aircraft and
planes. Lastly report will also contain findings and recommendations such as Virgin airlines need to
increase its global presence by leveraging its business, company need to invest in research and
development area and invest in digital technologies
MAIN BODY
Virgin Airlines is one of the British Airlines carrier started in 1984. It is considered as one of
the best air carrier in terms of quality, speed, punctuality. The main issues and challenges in the
company is that there was difficulty in Roll – Royce engine which affected the demand in UK
market.

Section 1. PESTEL analysis
PESTEL analysis is one of the strategy with the use of which every business organisation
can determines all the macro environmental factors which are having negative impact on the
working as well as on its business operations. It helps in analysing future trends in respect of
political, economic, social, environmental, technological as well as legal aspects (Gupta, Gupta and
Gupta, 2019). With the help of PESTEL Analysis, it will help Virgin airlines in making use of all of
its internal competencies and seeking competitive advantages from current market opportunities
thereby neutralising all the threats coming in its business operations.
Political – As per the political aspect, different factors such as government policies, rules,
regulations have impact on the working of Virgin Airlines. The environment in which such
company is operating is having high regulatory frameworks which is in favour of passengers and
customers irrespective of airlines. Due to the fact that passengers safety is of utmost need in case of
all the aviation industry business, it is required to follow all the norms and regulations as laid down
by government of different countries and places where it is conducting its business operations
(Zahari and Romli, 2018). Further, due to deregulation on the supply side results in more
competition for Virgin with regulation on demand aspect depicting more passengers can have
impact on increase in amenities and low price level.
Economic – Because of huge decline in the pound Sterling value as compared to last 31
year, it has created negative impact on the revenue margins of Virgin Airlines to a large extent. Such
economic loss arises due to its business operations expenses basically depends on pound Sterling.
But it has get some benefits as well, i.e. due to decline in fuel prices especially of Brent Crude oil in
the first half of 2016 by 21.8% (PESTEL Analysis of Virgin airlines, 2019). Economic instability,
declining in passengers and fliers traffic, increase in aviation fuel prices, maintenance and operating
cost, high competition due to minimal and low cost carriers has contributed in making loss to
airline. Also, it has come up with situation of bankruptcies, business closure because Virgin has
become no longer capable of performing its business operations in profitable manner.
Social – Many airlines has to face social factors which are out of control of airlines which
gives rise to increase in difficulty on both the operational as well as economic level. Factors such as
strikes of Air traffic controller, emergence of Millennial generation in the consumer class has
resulted in social changes which is giving rise to instant gratification, high demand in terms of
service quality and types. This is required on part of Virgin airlines to maintain a proper and
effective balance among its operational and economic cost expenses so that it cannot hamper its

demand and remain capable of meeting its competitive advantages by fulfilling its customers as
well as market demands (Rastogi and Trivedi, 2016). Also, belief and norms has changed among
mindset of many passengers i.e. now passengers has become more economical and less business
class preferring use of better improved communication system so as to conduct meetings in spite of
travelling.
Technological – Airlines mostly used high and best quality technological aspects to a large
extent for carrying on its business operations in respect of aircraft and airlines one. Use of
technological advancements has been limited only to aircraft and airline related business operations
and doesn't includes aspects related to sections of ticketing, distribution work. Due to digital
revolution, the working of airlines industry has been disrupted to a large extent as it has affected its
overall business cost expenses and also cost structure. With the help of internet facilities, it has
assisted many passengers in making comparison among the prices of different airlines and thus
affects their decision making capacity. Also, such comparison affects the pricing policy of many
airlines because of search made by passengers related to prices.
Environmental – With the changes in climatic and environmental conditions, it has affected
overall business operations of Virgin Airlines as well. Also, along with climatic changes there has
been increase in the social awarenesses as well as consciousness, which has made passengers more
environmental friendly and conscious. Passengers and fliers are now keeping count on carbon
footprint which affects the demand of airlines in the marketplace (Fozer and et.al., 2017). Because
of such attitude of passengers and fliers, it has forced many business organisation dealing in
aviation industry to adopt green flying techniques, carbon emissions and making such airlines more
responsive towards the concerns of such environmentalists. Also, consumers and many environment
lovers are keeping an eye over the corporate social responsibility, its green initiatives which has
make pressure on Virgin airlines for remaining environment friendly.
Legal – There are number of lawsuits which has legally bounded airlines to perform in
better and well planned manner in line with the norms and regulations defined by the aviation sector
industry. These lawsuits has been made by either passengers, customers or by the workers of
airlines companies as well. Strong and effective business strategies and plans are required to be
made by Virgin airlines in context of gaining large customer base thereby making compliance of all
applicable legal rules, regulations and policies. By complying with legal systems and regulations, it
helps Virgin in overcoming issues related to delays, safety norms, decline in profitability and in
customer base as well(Rastogi and Trivedi, 2016).

Section 2. Porter's 5 forces model analysis
With the help of Porter's 5 forces model, every business organisation can determines all the
internal weaknesses and strengths which plays an important role in gaining competitive edge in the
marketplace. This model of Porter is a conceptual framework which is having its emphasis on
evaluating intensity of competitive factors as operating in different parts or sections of the market. It
helps Virgin airlines in identifying and analysing all the five forces of competition which helps the
industry in making its business operations more effective, profitable and efficient. Each of the
competitive factor is having varying nature and impact on Virgin Airlines. It comprises of 5 parts
viz. as follows:
Power of Suppliers
The suppliers of virgin airlines are Boeing, Airbus, ground supporters, vendors and other
fuel companies. Firms who make spare parts of airlines are also suppliers. Thus, there are many
suppliers in the aviation industries. It is said that supplier of aviation industry has very low power
and virgin airlines has upper hand in the interaction with them. Price of fuel may vary according to
the changes in global markets. As virgin airlines uses jet fuel, thus it is advantage for suppliers as
their fuel is expensive and superior product, it is not having many buyers which make virgin-
Atlantic most favoured customer for fuel companies (Zahari and Romli, 2018).
Power of Buyers

Airlines industry is mainly a buyers market where power of buyer is very high. Buyer's
power is very high because of huge distribution system. Virgin airlines is affected by the bargaining
power of buyers as customers has various options available in booking tickets. Online presence of
various companies have made easy for customers to book tickets. Thus, virgin airlines has changed
its business strategies and operation to provide affordable price to its customers in order to retain
them for longer period. If company does not change its business model than it may decrease its
market share (Fozer and et.al., 2017).
Threat of substitutes and complementary goods
In the aviation industry, there is high risk of entry and exit as there is huge investment
needed. There are various issues relating with financial issues, safety and trustworthiness. Virgin
airlines faces many challenges by external environment and it is hard for any other company to
enter in the market. There are frequent travellers who travel by air thus there is no threat for virgin
companies in attracting customers by providing services at low cost. There are some trends which
are been noticed such as businessman prefer virtual meeting, teleconferencing to cut the cost of
travelling in different locations (Zahari and Romli, 2018).
Threat of new entrants and exit from the market
In aviation industrial sector, barriers for making entry and exit from such industry are very
high as it comes up with the investment of huge amount of capital. For taking entry in such
competitive market place, every business organisation requires a heavy capital amount (Mathooko
and Ogutu, 2015). Also, when it comes to exit policy, it has become impossible for Virgin Airlines
to leave market in case of huge business loss as it has to follow all the obligations as defined under
the contract entered by the Virgin Airline.
Competitive rivalry
Many business organisation dealing in airline business enters the market in search of making
large profits and revenue margins. Virgin airlines always emphasises on making large customer base
thereby delivering best and high quality services to them. Also, focus has been made on ensuring
proper safety norms and features in line with regulations and standards defined. Virgin Airlines has
moderate competitive rivalry as it ensures that its services are of best quality and at a lower price as
compared to its competitor firms (Kharub and Sharma, 2017). By assessing all the strengths and
opportunities of its competitive firms with the help of Benchmarking tool or Key performance
indicators techniques, it has been able to capture large market share and customer base as well.
Section 3. SWOT of virgin airlines
Company need to do SWOT analysis to identify potential scenarios for expanding the
business by 2020 or beyond:

Strengths
 Strong brand image: Virgin airlines have a powerful brand value in front of its customers.
It is one of the best airlines which is punctual in time, provides good quality service and has
speed in dealing with compensation claims (Morden, 2017). It is one of the most popular
and preferred airlines in North America and Europe. It is one of the largest airlines in
British, it has loyal and strong customer base. Virgin airlines provides good quality services
which makes customers satisfied. It offers luxury at an affordable price which attract
customers a lot. Company has created a strong and positive brand image by giving value to
customers.
 Innovative and unique advertisement: Along with the powerful brand reputation, Richard
Branson promotes its business through unique and innovative ideas. Branson launched
virgin cola to attract new customers. Further, Richard was involved in stunts like playing
drowning character and flying hot-air balloon. These stunts were the main reason of its
successful brand image and popularity (Morden, 2016). People were stealing its salt and
pepper pots which was notices by the staff, then Branson said his staff to write “pinched” on
the shaker and put it on the dinner table as a mode of advertisement. Unique advertisement
strategies will attract customers and build a strong brand positioning in the minds of
customers.
 Join venture with Delta: Virgin airlines has joint venture with Delta airlines with the stake
of 49%. Through this joint venture, both the companies have open the doors to generate high
revenues and coordinate schedules, exchange its synergies and pricing strategies to generate
revenues. After the joint venture, Virgin airlines was operating one of the flights of the Delta
airlines. The joint venture was beneficial for both the companies as their customers base
increased, they satisfy customers needs and improve their business operations. It also
benefits company in increasing its capabilities, access new distribution networks, sharing of
risks and costs with other company. Company has an opportunity in recruiting talented staff
and use resources. It also created many opportunities for the company (Boyd and et.al,
2017).
 Improves IT systems: Virgin airlines has adopted IT systems by investing in it. It helps
company in tracking inter-airlines and billing. The adoption of IT systems has become one
of the major strengths of the business. It creates a competitive advantage for the company
and this strength will help organisation in expanding its business globally. WNS is a global
process management firm which provides data processing service. This involves handling
calls, e-mails, ticketing, fares, frequent flyer inquiries, tracing and post-flight complains. It
also focuses on meal allocation, crew reporting and revenue management. IT systems has

decreased the effort of human and increased efficiency. Adoption of new technology helps
company in competing in the market effectively (Koryak and et.al., 2015).
Weakness
 Minimal global presence: One of the major weakness of the company is that it has very
less global presence as it concentrates more on North America and Europe. Virgin airlines
need to take advantage of other economies in the Asia. Company does not have global
presence which means it lacks resources. Firm usually operates in Shanghai, Delhi, Hong-
Kong and Dubai. Thus, its customer base is limited. Having a strong and powerful brand
image will help company in expanding its business globally. Firm has to enter in new
economies such as Abu Dhabi, soul, Mumbai and Doha. Strong brand image will be
beneficial for the company to compete in the market and increase its customer base (Engelen
and et.al., 2015).
 Strong competition: The area in which virgin airlines is operating, there are many
competitors also operating in the same areas. American carriers, British airways and rich
gulf airlines is operating in the same routes. Strong competition in the market has reduces or
decreased the market share of the company. Customers are distributed among the
competitors which decreases the revenue generation of the business. Company also need to
match the quality standards and make pricing strategies which will be beneficial for comp-
any to retain loyal customers for long period (Herman, 2016).
 Low research and development: Virgin airlines has low investment in research and
development area. This becomes a weakness for the company. Company lack in gathering
information about the trends and change in the economy. Company need to invest in the
research and development areas in order to collect information so that firm may decide
whether to invest or not. R&D department provides every detail about the marketing
strategies and provide information regarding new strategies which may be beneficial for
company (SWOT of virgin airlines, 2019).
Opportunities
 Leverage its brand: Virgin airlines has an opportunity to leverage its brand globally as it
has strong and powerful brand value. Company has an opportunity to expand its business
and increase its market share. As company has many competitors which are operating in the
business in same routes that creates challenges for company to compete in those areas,
company need to implement new strategies to attract customers. By leveraging in other
countries, company may benefit from their economies and gain new knowledge, strategies,
attract new customers and generate revenue. Leveraging its business will lead to increase in
customer base and gaining resources as a competitive advantage (Morden, 2017).

 Takeovers: For expanding in the market, company can takeover other business in order to
gain more synergies to sustain in the market. Takeovers will be beneficial for virgin airline
to attract the existing customers of the company which is being taken over. Company will be
already having customer base thus organisation does not need to invest in marketing activity
hugely. Takeovers will be advantageous as company already know the needs of customers so
it is easy for company to build strategies and make its product and services affordable to
them (Boyd and et.al, 2017).
Threats
 Implementation of Brexit: Withdrawal of the British from European union usually known
as Brexit has affected the business very badly. After implementing Brexit, there was an
increase in trade cost and decrease in the investment in UK. Brexit affected the airlines
industry and damage their financials position. Some airlines which were registered in UK
lost their share by 33%. All industries were affected by Brexit but majorly affected industry
was airlines. Airlines operating under British AOC and registered under UK will have to
stop their business due to implementation of Brexit. However airline industry was suffering
from high fuel prices, Brexit has also affected (Herman, 2016).
 Digital disruption: Constant change in the technological environment and introduction of
new digital technologies has affected the companies in airlines industry. Digital disruption is
a risk for virgin airlines because company need to invest large amount of funds in
technologies and digitalisation. There is a continuous change in the technologies which may
be threat for the company because it need to cope up with the changes regularly. In airline
industry, there are many IT and software which areused in the business like air traffic
controllers, handling calls, e-mails, ticketing, fares, frequent flyer inquiries, tracing and
post-flight complains (Koryak and et.al., 2015).
 There are many possible threats which may arise in 2020 or beyond years for the airline
industry are uncertainty in fuel prices, global economy slowing down, change in the demand
of customers, technological change, change in the government policies regarding aviation
industry etc. these challenges are threat for the company in increasing its profit margin and
sustain in the market.
Recommendations
From the above SWOT analysis, it can be recommended that virgin airlines need to adopt
these:
 Virgin airlines need to increase its global presence by leveraging its business in different
countries. This will be beneficial for company to increase its market shares and attract more

customers. Entering in new market will help company in gaining different synergies as a
competitive advantage.
 Virgin airlines need to invest in research and development area so that it will be easy for
company to identify the trends in the market, identify the customer needs and wants so that
company improves its services and retain loyal customers. This will help company to sustain
in the market for longer term. It will increase the revenue generation of the company.
 Company also need to invest in digital technologies which is useful in the airline industry
because most of the work is done through digitalisation. Company need to train employees
and adopt the changes quickly. There is a threat of change in the technology in future years
which will be challenging for company to invest huge amount of funds and adopt the
technology.
CONCLUSION
From the above study it can be concluded that virgin airlines is one of the largest British
airlines. Company has good brand image in front of its customers which help it in retaining loyal
customers. It is also concluded that company has improves IT systems and software's which has
reduces human effort. Virgin airlines has joint ventured with Delta airlines which has benefited both
the companies in generating revenues. Implementation of Brexit has also affected the airline's
industry very badly. Thus, it is concluded that company need to invest in research and development
area, expand its business by leveraging and invest in digital technologies. With the help of PESTEL
analysis, Virgin Airlines has been able to evaluates all the macro business factors in form of internal
competencies which helps in gaining advantages from such market opportunities. Also, it helps in
making neutral effects of all the threats which are impacting its business operations. For assessing
all the macro environmental factors, Porter's 5 forces model has been used by Virgin Airlines. It
defines about strict contractual obligations which all the aviation business firms are required to
follow for making entry and exit.

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