Virgin Atlantic Strategy Analysis

This report analyzes the external and internal environment of Virgin Atlantic Airways using PESTLE analysis, Porter's Five Forces, and Value Chain analysis. It examines the impact of political, economic, social, technological, legal, and environmental factors on the airline's operations. The report also assesses the competitive landscape and identifies key activities that contribute to Virgin Atlantic's competitive advantage. Desklib provides past papers and solved assignments for students.

STRATEGY AND
ENTREPRENEURSHIP

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Environmental macro-analysis................................................................................................1
2. Industry analysis......................................................................................................................5
3. Internal Analysis.....................................................................................................................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Strategic entrepreneurship refers to using strategic perspective for taking entrepreneurial
actions. It's a process of making changes in established business, for firm’s growth, innovation
and wealth creation, through integrating strategic advantages seeking actions and entrepreneurial
opportunity (Johnson and Van de Ven, 2017).
Virgin Atlantic is a British airline established in 1984, headquartered at Crawley, UK by Mr
Richard Branson. It was first known as British Atlantic Airways. Airline comprises of Virgin
Atlantic Cargo and Virgin Atlantic flights, along with Virgin Holidays is been controlled by
Virgin Atlantic Ltd. Company's 49% shares are owned by Delta Air Lines and 51% by Virgin
Group. Airline headquartered at Crawley, UK ministers strategic vision of ensuring sustainable
growth in delivering overwhelming customer's experiences. Virgin Atlantic was voted as no. 1
for UK-TATL customer satisfaction. In 2017 they have flown around 5.3 million passengers and
have about 9,800 employees. They have a revenue of 2,663.7 million Euros. Their mission
statement is to embrace human spirit and let it fly. Being a premium British airline is the Unique
selling proposition of Virgin Atlantic, to offer luxury flying at an affordable price and becoming
first European carrier to offer in its entire fleet of flight with Wi-Fi.
In this report an analysis of internal and external environment is been done. For
determining external environment, environmental macro analysis is being done using PESTEL
analysis. For identifying factors affecting organisation within industry, Five Force Analysis is
being done and discusses the attractiveness of industry. Using appropriate strategy tools
organisation's strategic capabilities is been determined, which can give competitive advantages to
company. Internal analysis refers to identifying internal and external organisation's competency,
its cost position and competitive place in marketplace. It helps organisation to integrate measures
which gives useful information about enterprise's strengths, weakness, opportunity and threats.
Value chain analysis is being used for identifying key activities, which have potential of
sustainable competitive advantage for organisation.
MAIN BODY
1. Environmental macro-analysis
Every business is being affected by macro environment, which contains many factors that
could even destroy organisation's business. Macro environment can influence overall economy of
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business and also affects their customers (Dhliwayo, 2014). For determining these factors
affecting Virgin Atlantic's operations or business PESTLE analysis is being done. This analyses
influences of political, economic, social, technological, legal and environmental factors of
business. These factors can't be harnessed directly by organisation, yet each of the elements
affecting business enterprise.
PESTLE Analysis for Virgin Atlantic:
Political:
 Ambiguity in future trade policy: Aviation industry have to heavily rely on European
Union policies, as Britain has not clarified policies of newly liberalized Britain. Country
have not formed new trade policies for industries to perform business with Europe or rest
of the world. This could affect business of Virgin Atlantic as they are required to plan for
their sustainability for at-least 2 to 3 years in advance. They have to spend a great amount
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Illustration 1: Pestle for Virgin Atlantic
(Source: PESTLE analysis, 2016)

in change management and transition costs, as policy is not aligned with organisation's
strategies (Block, Kohn and Ullrich, 2015).
 Brexit: It has created a political turmoil, threatening hospitality in prime locations like
Brussels, Nice and Paris. It has sent waves of economic and political disturbances across
member countries of EU. Securing liberal market access between United Kingdom and
United States is the top priority of Virgin Atlantic, as UK, is no longer a part of EU-US
Open Skies air service agreement. It is also required for them to remain under protection
of current regulating body of air traffic and operations, i.e., European Air safety Agency
(EASA). They have to expect for new agreements and have to coordinate between both
governments for their stability and profit.
Economic factor: Uncertainty in capital markets, increase in unemployment rates, diminishing
household budgets, and reducing house prices would lead to decrease in consumer's confidence
and Virgin Atlantic's business.
 Fuel prices: It is one of the most significant economic factor affecting Virgin Atlantic, as
they use approximately 5 million tonnes of jet fuels annually. Company's expenses on
fuel have reduced by large amount due to decrease in its rates. Hence, their scope of
operations has been increased. It's an important economic factor which greatly benefited
business, due to reductions in prices for fuel.
 Lower interest rates: This positively affects Virgin Atlantic, as it would lead to invest
on new technology and capital. Due to this the rate of return will increase, at lower costs
services would be available and value for infrastructure will rise. Which would
financially benefit organisation, with lower inflation rates and will generate better quality
services and would result in higher demand (Kuratko, 2016).
Social Factors:
 Customers: Persons travelling, whether it's an individual passenger or a business
traveller, would always look for travel in a trusted airline. Customers tries to ensure that
their journey is been smooth. Due to economic crisis travellers have become more
concerned about prices offered by airlines. Virgin Atlantic's operations are being affected
by their customers’ demands and needs. They have to manage their prices accordingly for
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giving better services at lower prices (Garud, Gehman and Tharchen, 2018). As
customers look for value of their money which would provide them standard or high
quality services at low costs. They might look on different websites for comparing
various prices offered by various airline services. ATC Strikes: Air traffic controllers have raised prospects of strike actions over
government proposals for privatise service. This would affect Virgin Atlantic's operations
as, there would be not enough staffs for performing various functions or roles. This
would hinder in operations of company, as they have to cancel or delay their flights and
due to which they will loss huge amount of money.
Technological Factors:
 Digital disruption: Digital innovation in airline industry would bring smart machines,
people and advanced analytics together. Uses of advanced technologies for gathering data
using sensors, for analysis and decision making through software. Virgin Atlantic have
turned to international global alliances for keeping their planes full. They continue to
engage in mergers for gaining access to large market shares and more new routes. Air 4 technology: Virgin Atlantic's have developed software for providing services to
passengers, managing service systems, backend ticketing, rebooking system
management, airport and call centre tool management. Organisation have to manage their
servers and cloud computing for supporting software as a service (SAAS). They have to
manage their systems and link all operations online, for facilitating customers.
Legal Factors: UK's legal regulations also affects business and its operations. Virgin Atlantic's
business is being controlled by nation's legal regulations and policies. Control imposed on
organisation and industry varies from issues related to their flights routes, infrastructure, modern
security, slot capacity and environmental needs. In order to ensure security and safety of their
passengers, different countries have introduced various regulations, rules and quality standards
for airline. This makes compulsory for Virgin Atlantic for compliance on these rules or
regulations for travelling in these countries. For maintaining certain levels of standards and
services, by company have increased their costs. Due to different legal restrictions and
requirements it has become difficult for them to operate in new countries (Kew and Stredwick,
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2017). Laws and regulations have become stricter for airlines, which have become a bigger
challenge for Virgin Atlantic.
Environmental Factors: Various environmental factors faced by airline sector consists of noise,
air, land take, waste management and water pollution. Virgin Atlantic have to cope with different
concerns regarding environment, such as air pollution, waste management or climate changes.
Government have made rules and regulations concerning limiting increase in emissions and
regulations. Virgin Atlantic have to come across a widespread scope of local, national and
international environmental regulations. They have to develop corporate social responsibility
programs for addressing this issues (Blackburn, 2016). They have to invest in for bringing eco-
friendly planes which uses bio fuels in order to work for environment protection.
2. Industry analysis
Industry analysis refers to tool which helps an organisation to determine its current
position relative to other enterprises, producing same related products or services. It allows
company to estimate their profit generated from various business operations. They can also
assess the number of rivals or competitors, present at industry selling goods and services to
customers (Porters Five Forces, 2013). Virgin Atlantic faces a challenging and competitive
external environment, which affects their operations.
Using Porter's 5 force analysis, airline industry is being analysed for Virgin Atlantic: Entry and Exit Barriers: Entry and exit barriers in aviation industry is much higher, as it
takes lot of capital for entering into airline industry. Airline industry have tight
regulations and rules which would restrict the entry of new organisation. Typical barriers
to entry includes licensing agreements, patents, regulations, laws, etc. For entry they have
to satisfy regulators about safety aspects along with financial stability and airworthiness
of the carriers. Virgin Atlantic faces an external environment which is tougher for new
entrants to secure themselves. Industry Rivalry: In search of profits, more and more carriers are affecting this sector.
Industrial rivalry is quite high and affects Virgin Atlantic very much. Increasing carriers,
have resulted in shrinking of passenger proportion, leading to cut-throat competition and
fare wars among competitors (Shaw, 2016). More consolidations are being done and low
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profitability drives airline firms towards mega mergers. For managing or counter this
rivalry in this sector, Virgin Atlantic have to ensure competitive advantages through
variety of services, flexibility of volumes and innovation. Bargaining Power of Suppliers: Large aircraft makers like Airbus and Boeing are
suppliers for Virgin Atlantic. Various aviation fuel companies, handling vendors and
ground support are also suppliers in aviation industry for carriers. Those who make spare
parts for airlines are also included in provider for them. The power of suppliers is low, as
airline industry have few carriers and large dealers. Virgin Atlantic have an upper hand in
interactions with suppliers. As jet fuels are very much costly and is a premium product
only used in aircraft, Virgin Atlantic have a distinct advantage. Which means that there
are not too many buyers, making Virgin Atlantic a major customer for the aviation fuel
companies. Bargaining Power of Buyers: On Virgin Atlantic, one factor or force that has maximum
or higher impact is of bargaining power of their buyers or customers. As airline industry
is mainly a buyers' market, due to availability of different choices. Threat of low cost
carriers and intense fare or price wars, which cuts market shares of established rivals.
Many airline firms have successfully imitated Virgin Atlantic's business models, as they
already providing low cost flights. Other's also have implemented low price strategy
which is taking away their customers. Virgin Atlantic has to determine their customers or
clients' demand or needs to differ from their competitors, otherwise they would lose their
market shares (Buhalis, 2014). Increase in distribution channels, where buyers purchase
their tickets, have also impacted organisation by buyers bargaining power, as they could
choose carrier which provides better benefits to them. Threat of Substitutes: For Virgin Atlantic, the threat of substitutes is not much high or is
moderate, as most people in west countries often travel by air. Due to recession most
business passengers who used to fly for attending meetings, would prefer virtual
meetings, teleconference, etc. instead of traveling down to partners or clients for business
meetings. Travellers are now adopting the latest trends of leisure travel and substituting it
with inexpensive options like budget cruises or slow tourism which imply less
dependency on air travel. This would reduce or cut down the share of market for Virgin
Atlantic. If customer looks for low price, then there are high chances of choosing other
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modes of transport instead of flights. Or if they seek for time saving and convenience,
then would highly prefer to travel via Virgin Atlantic.
3. Internal Analysis
Internal analysis refers to identifying internal and external organisation's competency, its
cost position and competitive place in marketplace. It helps organisation to integrate measures
which gives useful information about enterprise's strengths, weakness, opportunity and threats.
Value chain analysis is being used for identifying key activities, which have potential of
sustainable competitive advantage for organisation (Daft and Albers, 2015). If company's value
chain along with its ability to perform important activities are better than its competitors, then
organisation have a competitive advantage.
Virgin Atlantic, for determining competitive advantage for organisation, they involve adoption
of systematic approach of value chain analysis. Distinction between primary and supporting
business activities are made in framework, identifying sources of competitive advantage for each
operations. Primary activities are those related with production of goods or services, while
support activities are those which provides background necessary for efficiency and
effectiveness of organisation, such as infrastructure, human resources, technology, etc.
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Illustration 2: Value Chain Analysis for Virgin Atlantic
(Source: Value Chain Analysis, 2018)

Primary Activities Inbound Logistics: Inbound logistics operations of Virgin Atlantic airways are very
much complex and involves timely delivery of fleet of planes, catering products, like
food or beverages, and other wide range of on-board products. Virgin Atlantic inbound
logistics primary activities can be complicated as they have to ensure freshness of foods
and drinks that are served during flights. Organisation through establishing ongoing
relationship with suppliers, professional training which is been accredited by Guilds &
UK City and implementing sophisticated system for controlling stocks. Operations: Preparation of goods and services for selling them to customers are involved
in operations stage. Virgin Atlantic as one of the UK's largest international scheduled
airline company, they provide services to more than 30 destinations globally. Having
fleet size of 48, therefore their scope of business operations is wide. Virgin Atlantic have
a great scope of competitive advantages in their operational part of their business. by
providing their customers with increase in their security of persons or for their baggage’s,
offering services such as online ticket bookings and quick check in services. For Virgin
Atlantic, stable sources for their additional value is been represented by high level of
customizing service provisions and utilising digital technologies at an extensive level. If
their operations are efficient then they can price their seats at a competitive level for
attracting more passengers. Outbound logistics: It involves delivering processed products for consumption by
customers. Moreover, outbound logistics is being related to manufacturing firms,
however it can also be applied to service industry such as airlines. Virgin Atlantic
provides services to nearly 33 countries worldwide. They derive value in primary
operations of outbound logistics through providing on time scheduled flights, at point of
destinations efficiently handling customers' luggage’s, utilising advanced communication
and information systems. Marketing and Sales: Virgin Atlantic directs their marketing strategy at communication
of promotional messages to their targeted customer segments. Their marketing message
tries to associate organisation's brand with reliability, convenience, efficiency and safety.
Using effective range of marketing mix such as print or multimedia advertisements,
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direct marketing, events, sale promotions, and public relations for promotion or publicity
of products or services to targeted customers (Allee, 2016).
 Services: Virgin Atlantic have identified after sales services as a vital factor for attaining
competitive advantage in airline industry. For this they have maintained communication
and relationship with their customers and clients through wide range of channels, they
have also initiated loyalty club cards for their frequent passengers. Virgin Atlantic in
order to improve different aspects of their service provisions, commits to financial
investments in an organized manner. They have come up with digital boarding pass for
their customers for reducing time taken in check in process.
Support Activities Procurement: Virgin Atlantic have separated their procurement into various separate
units such as flights, in-flight services, merchandise, hotels, etc. All these procurements
are connected with a common goal of Virgin Atlantic. Each unit can focus on their own
operations. Human Resource Management: Virgin Atlantic hires multiple talented or skilled
employees in order to increase efficiency and quality of their services. This would reduce
the cost and time that would take for training and developmental activities (Daft and
Albers, 2015). Pilots are being provided with regular training and also provides
personnel’s with safety training for ensuring protection of passengers. Firms Infrastructure: Virgin Atlantic's main goal or focus is to provide low cost
travelling for their customers. They regularly inspect airports for safety of their
passengers. They adopt appropriate financial models for managing capital or money
within organisation. Technology Development: Company have implemented various technological
advancements for ease up services to customers (Allee, 2016). They have implemented
online reservation systems for saving time taken for booking tickets at on desk counters.
Virgin Atlantic have established digital boarding pass for quicken their checking process.
They have an advanced flight management or scheduling system for controlling their
planes schedule time.
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Operations process in primary activities would give competitive advantages for Virgin
Atlantic. As, their differentiated products and services could give them a competitive position
against their rivals. With their efficient operations they have an extensive scope for expanding
their business at a wider area. When customers are provided quicker check in services and given
services such as booking tickets online, they would feel convenient while travelling and would
choose them over others. Trust and reliability among passengers can be increased by Virgin
Atlantic, if they offer customers with increased security of their baggage’s and of themselves.
When customers are provided with cheaper travels and better services at low prices they would
be attracted towards their airline services, which would give company a competitive advantage
over others.
CONCLUSION
From this report it can be concluded that, every organisation is being affected by the
changes in environment, whether it is external or internal. There is certain external macro
environment that affects organisation are political, economic, social, technological, legal and
environmental factors. Political factors like Brexit or future trade policy can affect organisation.
Economic factors include, uncertainty in capital markets, increase in unemployment rates,
diminishing household budgets, and reducing house prices would lead to decrease in consumer's
confidence and organisation's business. Social factors also affect business at macro level, like
customers preferences, strikes, etc. Digital innovation in industry would bring smart machines,
people and advanced analytics together. Uses of advanced technologies for gathering data using
sensors, for analysis and decision making through software. UK's legal regulations also affects
business and its operations. Organisation's business is being controlled by nation's legal
regulations and policies. Company have to cope with different concerns regarding environment,
such as air pollution, waste management or climate changes. Industry analysis can be done by
organisation to determine its current position relative to other enterprises, producing same related
products or services. It allows company to estimate their profit generated from various business
operations. They can also assess the number of rivals or competitors present at industry, selling
goods and services to customers. Value chain method is being used to help organisation for
integrating measures, which gives useful information about enterprise's strengths, weakness,
opportunity and threats. Value chain analysis is being used for identifying key activities, which
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have potential of sustainable competitive advantage for organisation. Company's value chain
along with its ability to perform important activities better than its competitors, then organisation
have a competitive advantage. Operations process in primary activities would give competitive
advantages to organisation. As, their differentiated products and services could give them a
competitive position against their rivals.
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REFERENCES
Books and Journals:
Allee, V., 2016. Value network analysis and value conversion of tangible and intangible
assets. Journal of intellectual capital, 9(1), pp.5-24.
Blackburn, R.A., 2016. Government, SMEs and entrepreneurship development: Policy, practice
and challenges. Routledge.
Block, J.H., Kohn, K., Miller, D. and Ullrich, K., 2015. Necessity entrepreneurship and
competitive strategy. Small Business Economics, 44(1), pp.37-54.
Buhalis, D., 2014. eAirlines: strategic and tactical use of ICTs in the airline industry. Information
& Management, 41(7), pp.805-825.
Daft, J. and Albers, S., 2015. An empirical analysis of airline business model
convergence. Journal of Air Transport Management, 46, pp.3-11.
Dhliwayo, S., 2014. Entrepreneurship and competitive strategy: An integrative approach. The
Journal of Entrepreneurship, 23(1), pp.115-135.
Garud, R., Gehman, J. and Tharchen, T., 2018. Performativity as ongoing journeys: Implications
for strategy, entrepreneurship, and innovation. Long Range Planning, 51(3), pp.500-509.
Johnson, S. and Van de Ven, A.H., 2017. A framework for entrepreneurial strategy. Strategic
entrepreneurship: Creating a new mindset, pp.66-85.
Kew, J. and Stredwick, J., 2017. Business environment: managing in a strategic context. Kogan
Page Publishers.
Kuratko, D.F., 2016. Entrepreneurship: Theory, process, and practice. Cengage Learning.
Shaw, S., 2016. Airline marketing and management. Routledge.
Online
PESTLE analysis. 2016. [Online] Available through: <http://pestleanalysis.com.>
Porters Five Forces. 2013. [Online] Available through:
<https://www.cgma.org/resources/tools/essential-tools/porters-five-forces.html>
Value Chain Analysis. 2018. [Online] Available through:
<https://www.businessnewsdaily.com/5678-value-chain-analysis.html>
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