Strategic Analysis of Virgin Atlantic: Business and Environment

This report provides a comprehensive analysis of Virgin Atlantic, examining its strategic context, business organization, and the impact of both internal and external factors. The report delves into the company's mission, vision, and core competencies within the airline industry. It utilizes PESTEL and P...Read More

Virgin Atlantic

Table of Contents
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
Introduction..................................................................................................................................1
Strategic context..........................................................................................................................1
Business organization..................................................................................................................2
Environmental analysis................................................................................................................2
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
Every business operates in macro and micro environment. The micro in known as
internal whereas macro is called external. The factors of both impacts on business operation to a
great extent. Thus, they have to analyse it for developing goals and objectives. Besides this, each
organisation has mission, vision, corporate strategy, etc. To achieve this, several strategies are
developed according to level in organisation. This report will discuss company mission,
objectives, etc. and types of strategies. Also, it will analyse internal and external factors and how
it affects business strategies. For present report organisation selected is Virgin Atlantic. It
belongs to airline industry and operates globally.
PART A
Introduction
Business requires strategies to attain their goals and objectives. Strategies provide a
framework through which both long and short term goals can be achieved (Camisón and Forés,
2015). It contains several methods and procedures, activities and many other things related to
operation and functions of business. It is a blueprint of overall implementation and evaluation of
strategies. It also includes resources and timescale of doing activities and through different
approaches
Strategic context
It is very important to develop a strategy in order to attain goal. It provides a systematic
way of performing activities. Strategies are developed for a time interval. There are certain levels
of strategies which is as follows :-
Corporate – This is first level strategy which is formed for a specific department with long term
plan. It is a large scale strategy that defines value adding, portfolio issues, etc. it is developed for
overall products and services provided by Virgin Atlantic. It gives direction to mission and
vision.
Business – This is second level that is formed for different markets and products. Generally, it is
developed to support corporate strategy (Wang, Gray and Meister, 2014). Moreover, there are
sub sets in this as well. They are low cost, focus, etc. it is directed towards attaining long term
goals and objectives.
Functional – It is low level formed to attain business strategy. They are basically implemented
at operational divisions and is related to specific function like finance, HR, operations, etc. they
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are formed to attain short term goals for a particular time period. Strategies play a significant role
in achieving goals and objectives. It enables manager to assign task and resources as per the
schedule.
Business organization
Virgin Atlantic is a British Airline headquartered in Crawley, UK and operates in
different countries. It was established in 1984 as British Atlantic Airways. The parent company
holds 51% shares and rest 49% are held by Delta Air lines (Van Calster, D'Argembeau and
Majerus, 2018). Airline main base is in London and Manchester. The destination include is
America, Africa, Asia and middle east. There are many flights which run in various schedule.
Company has almost covered every major area by connecting capitals of each country.
Mission – To embrace the human spirit and let it fly.
Vision- Changing business for good
Goal – the goal is to provide smooth and safe travel services to people all around the world.
Objectives – To increase sale up to 12.5% in next five years.
Core competencies – it refers to products and services that are provided by company. Virgin
Atlantic core competencies are as follows :-
 The high class and quality of services in long distance travel.
 Variety of services for different class and income level of people.
Environmental analysis
In today’s world business environment is constantly changing. So, businesses and
industries are affected by its surrounding environment in which they operate. Any change in
macro and micro affects business operation adversely. Also, the strategies developed are on basis
of factors. Moreover, decisions are affected due to change in it (Jeucken and Bouma, 2017).
Therefore, it is necessary to analyze those factors so that it becomes easy to develop strategies
and impact can be minimized. The external factors of airline industry is as follows :-
PESTEL
 Political – It is related to political situation of a country. In this government develop and
regulate laws and regulations related to industries. In many countries there are strict rules
developed regarding the risk associated and safety of passengers. Thus, companies are
adhered to follow these. Insecurity is a factor that has created negative impact. It has
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bounded aviation sector to operate in any country. Virgin Atlantic also has to follow
those laws and regulations of different countries.
 Economic- It includes factors such as currency rate, tariff and trade policies, etc. that is
regulated and controlled by government and central bank of a country. In recent times
rise in fuel prices has put intense pressure on companies (Fortwengel, 2017). Other
factors include competition for low cost carrier, operating costs, maintenance, etc. It has
been difficult for them to earn and generate profits. They are now focusing on merging
with other airlines. This has led to bankruptcies of airline companies. For example, in
India Kingfisher and Air India. Virgin Atlantic ticket rate are not cheap as offered by
competitors. So, it has resulted in decline in sales and profits.
 Social – In present times there has been a high change in taste and preference of people.
Social factor is related to society and culture of country. In includes living standard,
income level, class, needs, etc. now passengers prefer those airlines which provide
extended services at low cost (PESTLE Analysis of Airline Industry. 2018). This is
reduced the number in business class travelers. Virgin Atlantic fares are high and people
needs are changed. They want low fares for long destination. it is impacting company
growth.
 Technological – As name depicts it is related to change or advancement in technology of
nation. In today’s digital world there are numerous innovations in technology. It has
allowed developing countries to utilize them for development (Kossmann, 2017).
Passengers now prefer to check in from hand held devices. Also, booking tickets from
website has made it easy for them to travel. Now, industry advertises products on social
media platforms. The quality of services has improved resulting in retaining of
customers. Furthermore, technology has enabled in providing more safety measures to
passengers. The air traffic control system has been updated resulting in less accidents and
effective monitoring of air routes. Virgin Atlantic has not implemented hand held device
check in system. Also, ticketing booking is not as quick as other. It is affecting their
operations.
 Environmental- This is the most important factor that is related to change in
environmental laws and regulations, CSR activities, etc. aviation industry is closely
related to atmosphere. Companies have to protect environment by practicing green
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approaches. in this they cannot compromise due to their accountability. The global
industry has become more competitive and expensive. It has enforced government to
impose strict regulations. This is affecting their growth and expansion. People are now
more aware protecting climate. Virgin Atlantic is affected due to continuous change in
laws in US and UK. Due to this their operations are impacted. Moreover, they are not
involved in green practices.
 Legal – They are considered as rules, policies, standards, etc. related to particular
industry. Many nations have changed their laws related to passenger safety and security.
These are to be followed by airline companies (Flouris and Oswald, 2016). The
responsibility of companies has increased. For any air crash they have to investigate and
provide funds. Apart from this, several laws are made on how to treat passengers and
what services are to be provided. The change in custom duty tax rate and other taxes are
affecting industry. Virgin Atlantic has to develop policies according to laws of different
nations. It is affecting their operations.
It can be analyzed that there is high influence of external factors on Virgin Atlantic; it has
impacted on their growth. The profits are decreased and quality of service is not effective as
well. Moreover, Virgin Atlantic changes their policies with respect to countries. So, this is
affected their operations. Company is competing with big players and due to rise in oil prices
ROI has declined.
Porter’s five force model
It is also known as external factor within which business operates. But the scope of model
in narrow than Pestle. It only focuses on customers, competitors, etc. through this; it is easy for
company to analyze different elements. Aviation industry is been impacted due to many factors.
It has created war between government and sector regarding laws and issues. The model is been
described as below :-
 Threat of substitute – it is related to use of substitute in case of non availability of
product. Virgin Atlantic industry belongs to transportation sector. So, people can use
other modes of transportation to travel from one place to another. They may find it cheap
and safe to travel via railways, roadways, etc. so, there are many substitutes that can be
used in place of airplane.
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 Threat of new entrants – it is very difficult to enter and operate in aviation sector as it
requires a huge amount of capital and resources. Also, companies are bound to follow
rules and regulations. Virgin Atlantic is already operating in different parts of world. In
recent time many new companies have entered in airline industry (Bogers, Boyd and
Hollensen, 2015). This has resulted in giving tough competition. But Virgin Atlantic is
MNC so; there is no impact of new entrants on them.
 Bargaining power of suppliers – it refers to power of suppliers who are responsible for
delivering goods and services to consumers. If there will be few suppliers more power
they will hold and company has to be dependent on it. In aviation industry, fuel, aircraft
and labor are provided by only few suppliers. Thus, Virgin Atlantic has to depend on
them to fulfil their needs.
 Bargaining power of customers- it is similar to above factor. In this small customer
base will hold more power to cut down prices (Jarach, 2017). Virgin Atlantic is having
large customer base so change in price of tickets will not affect them. But on the other
hand they have to maintain standard level of price by regulating. Besides this, any
fluctuations in price and ticket booking channels will not prevent to book their tickets.
 Competitive rivalry- This reflects the level of competition that exists within industry. In
airline sector there are many other companies that are providing variety of offers and
services. Also, fares are low and prices are set according to income level of customers.
Virgin Atlantic is facing tough competition from rivals like Etihad, Fly Emirates, etc. this
has resulted in reducing their customer base and revenue.
By analyzing this, it can be said that Virgin Atlantic is not highly affected by change in
external factors. As it operates in different parts of world and provide high quality services at
moderate prices. They enjoy a large customer base (Camisón and Forés, 2015). Moreover, the
strict entry and exit barriers have restricted entry of new company. But there is high level of
competition among companies already operating in industry.
M3 Devise appropriate strategies to improve competitive edge
Strategic plan
Here, Virgin Atlantic need to form an effective strategic plan to expand in different
countries and minimize impact of change in external factors. For this company can develop short
term goals and strategies. It will help them to gain competitive advantage in the market.
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Goals and objectives
To develop variety of services and attract new customers
To retain 13% customers in overall UK.
Strategies – Here, an effective strategy is developed in which regular customers will be given
discounts and offers so that they can be retained. Moreover, membership will be provided to
those customers. Beside this, marketing will be done on social media platforms.
The company will also reduce cost and change their pricing strategy. It will help them to
become market leader in UK.
Another strategy that can be followed in giving cash back on membership and additional
benefits as well. By this they can gain competitive advantage in market.
Action plan - Action plan will enable Virgin Atlantic to monitor strategic plan and attain goals.
For this strategies will be modified according to market conditions. There will be some set
standards through which goals will be evaluated. It will enable in finding out weak areas and
taking effective measures to improve it.
CONCLUSION
It has been concluded that Virgin Atlantic mission, vision, goals, etc. are interrelated to
each other and is highly affected by internal and external factors. The airline industry is affected
by change in any laws and regulations by government. Country like India has developed policies
to allow FDI in it. The economic change is due to change in air fuel, ticket prices varies
accordingly. Now, people more likely prefer to travel via airplane. They consider it as safe and
quick mode of transportation. It is summarised that there are many barriers of entry and exit in
aviation. This has restricted new entry. Also, there are many substitutes that can be used in place
of airplane.
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REFERENCES
Books and journals
Bogers, M., Boyd, B. and Hollensen, S., 2015. Managing turbulence: business model
development in a family-owned airline. California Management Review, 58(1), pp.41-64
Camisón, C. and Forés, B., 2015. Is tourism firm competitiveness driven by different
internal or external specific factors?: New empirical evidence from Spain. Tourism
Management, 48, pp.477-499.
Flouris, T.G. and Oswald, S.L., 2016. Designing and executing strategy in aviation
management. Routledge.
Fortwengel, J., 2017. Practice transfer in organizations: The role of governance mode for
internal and external fit. Organization Science, 28(4), pp.690-710.
Jarach, D., 2017. Airport marketing: Strategies to cope with the new millennium
environment. Routledge.
Jeucken, M. and Bouma, J.J., 2017. The changing environment of banks. In Sustainable
Banking (pp. 24-38). Routledge.
Kossmann, M., 2017. Delivering excellent service quality in aviation: a practical guide for
internal and external service providers. Routledge.
Van Calster, L., D'Argembeau, A. and Majerus, S., 2018. Measuring individual differences
in internal versus external attention: The attentional style questionnaire. Personality and
Individual Differences, 128, pp.25-32.
Wang, Y., Gray, P.H. and Meister, D.B., 2014. Task-driven learning: The antecedents and
outcomes of internal and external knowledge sourcing. Information & Management, 51(8),
pp.939-951.
Online
PESTLE Analysis of Airline Industry. 2018. [Online] Available Through: <
https://www.marketingtutor.net/airline-industry-pestle-analysis/>
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