The Need for Change in Virgin Blue - Case Study Example

Introduction Organizational change has been one of the most widespread topics of discussion among the scholars and practitioners. In this unsteady business environment, organizations are seeking ways by which they can sustain and strengthen their position in the market place (Weiss, 2012). The present era is often dubbed as an era of change. However, this is not the first time when mankind is experiencing the series of changes in every sphere but what perhaps is more important is that change should be managed properly (Hussey, 2000). Due to the unsteadiness of the business environment, companies around the world are trying to bring in some kind of changes in their functioning system so as to comply with the changing needs. These changes appear in many forms such as a change in the product portfolio of the company, alteration of the marketing and operations strategy, transformation of the distribution system and implementation of a new technology (Taylor, 2009). Furthermore, changes also appear in the external environment of the organization such as changes in the customer preferences, new rules and policies from the government, changes in the competitive landscape and industrial relations. Such changes in turn compel organizations to bring in internal changes so as to comply with the external factors (Cowan, 2005). Any such changes require effective management from the part of the company. This is the reason why change management is often defined as a structured approach for transforming an organization from its current position to a desired position for the future. A change in the organization is therefore deemed as an opportunity to embrace growth or an opportunity to survive in the market place (A. Mills, Dye & J. Mills, 2008). This study seeks to scrutinize the need for change in an organization and how the changes suggested will be achieved or implemented. In order to carry out the study and assess the need for organizational changes and present a plan to implement same, the study will choose an organization and will analyze it accordingly. Therefore, in order to make it more understandable, the study will at first provide a brief overview of the chosen company. The company chosen in this context is Virgin Australia Airlines, the Australian air transport service providing company. Virgin Australia Airlines: A Brief Overview Virgin Australia Airlines previously known as the Virgin Blue Airlines is an Australian based airlines service providing company. It operates under the brand name of Virgin. The company is considered as the second largest airline company of Australia in terms of the fleet size. The company was founded in the year 2000 by British businessman named as Richard Branson and Brett Godfrey. It is now based on Bowen Hills, Brisbane (Virgin Australia, 2013a). The company commenced its operation with only two aircrafts and both are operating on the same single route. Since, the inception the company has been recognized as one of the strongest aviation companies due to its sheer service offering and affordable pricing. Despite, affordable pricing the company has always focused on the leisure sector and tried to position itself as a carrier that offer high value for money (Virgin Australia, 2013b). In the year 2011, the company repositioned itself as ‘new world carrier’. Since then the company has followed a business strategy in which it offers the ‘guests’ to avail no frill services in which they offer limited services and also offered customers with premium services in which customers need to pay a few extra bucks so as to get the additional services. With this strategy the company has been able to target a broader market. Currently the company caters to 50 destinations and serves 29 cities of Australia. The company remains highly proactive in the field of sponsorship and socially responsible activities. In the year 2011, the company again introduced certain new strategies where the employees are supposed to wear new uniforms, new wide-body aircraft and new catering options on the board so as to compete with the rivals at the highest possible levels. As of 2012, the total employee strength of the company is around 17000. The net revenue earned in the financial year was A$2,981.8 million and the net profit was Increase A$34.3 million. This fact & figures clearly depict the strong financial position of the company. Despite the number of positive factors the company still requires certain changes so as to remain competitive in the market place. The major competitor of the company is Qantas, Brindabella Airlines, Express Freighters Australia, Rossair and Skytrans Airlines to name a few. Diagnosis An organizational change is a precarious activity and involves jeopardy. This is because often organizations fail to implement the change properly or do not appreciate the proposed results. Another reason can be a strong resistance from the part of the employees as they generally fear any kind of organizational changes. In the context of Virgin Blue, there are several reasons that may initiate a requirement of change in the organization. Although the analysis of the company revealed that there are several causes for change, but the major causes are highlighted below: - Reducing Market Share and Decreasing Revenue: - The overall revenue earned by a company is very important in ensuring the company runs its operations efficiently. In the similar way, the market share of the company is vital for maintaining the position of the company in the market place as well as embrace development. With the slowdown of the global economy, the world experienced high rate of job cuts and reduced business growth. As a result of that, the leisure activities of the people greatly minimized and people are also reducing their spending on luxury. The Australian consumers are not the exception and they are also following the same. The leisure travelling activities by the Australians have greatly reduced and thus the company is experiencing a downfall in the total revenue. People are switching to carriers that are offering more affordable prices. The situation has reached a point where customers are even prepared to sacrifice their comfort and luxury for the purpose of gaining financial constancy. Therefore, it is necessary for the company to bring certain changes into the system so as to augment the revenues of the company and alongside increase the market share. Nevertheless, the changes which will be recommended will be strictly based on the present situation of the company. Poor Corporate Market: - The success of an airline company remains greatly dependent upon its relationship with the corporate houses. This is because corporate houses are the bulk purchasers of airline tickets and thus acts like a great source of revenue for the company. Moreover, the leisure travelling or business travelling is frequent among the business travellers. On the contrary, although the individual customers hold a great amount of share but the revenue generation is limited. The same issue is being faced by Virgin blue as majority of the corporate houses have tie up with other airline service providers. Therefore in such situation, the company is bound to implement certain strategies or functions so as to gain the confidence of the corporate houses. Launching of new services can be a viable option. Poor Customer Experiences: - Customers play the most important role in the success of a business. This is because a business cannot exist without customers. As a result, it is essential for a company to satisfy its customers and offer them with the best experience. Satisfying a customer also has several advantages. For example, the customer becomes a word of mouth promoter for the company if the company offers better experience to the customer experience. As a result, a company gets several advantages for offering better customer satisfaction. On the contrary, poor customer experience may cause several problems for the company. In the context of Virgin Blue, there are several cases found about the poor user experience of Virgin Blue. There are several customer complaints registered against the company complaining about the poor services or poor service delivery. High External Cost Pressures: - Since the great depression, the cost of raw materials have increased like never before. The cost of oil is however the major cause of concern for the company. As a result of this, Virgin Blue is not the only victim, but the entire airline industry is facing the difficulties. The prices of fuel are increasing regularly at a steady rate, despite that Virgin blue offers service at the same price. The profit margins have therefore reduced greatly and companies have no options but to reduce the prices. In doing so, there can be high customer switches to the low cost carriers. Regarding these issues, Milmo (2011) mentions that a slowdown in leisure air travellers as higher oil prices push up fares, but business class travel is expected to grow by up to 6% due to "growing world trade and business investment. Therefore, adoption of appropriate strategies will provide the company with an opportunity to experience growth. Intense Rivalry within the Industry: - The Australian airline industry is characterized by intense rivalry. Due to the presence of established players such as Jet star airways, airlines of Tasmania, Australian air expresses eastern Australia airlines, Qantas etc. companies are required to bring in continuous innovation to remain competitive (Pugh, 2007). The issues mentioned above are mostly external to the company, but these factors are extremely essential as it directly impacts the company’s well being. Hence, the company is required to bring certain change within the organization so that they can efficiently deal with the prevailing market challenges. Only planning the changes will not help the company to deal with the issues, but it should ensure that the strategies or the proposed changes have been implemented properly and change management has been carried out effectively. Kotter’s 8-Step Approach In order to ensure effective implementation of the proposed changes, the study will utilize Kotter’s 8-Step Approach (Ventris, 2004). According to this approach, there are 8 steps that a company should follow to plan and implement a change. This study will also make use of Kotter’s 8 step approach to carry out the implementation of the change. Figure 1 (Source: Samvara, 2013) Step 1: - Creation of a sense of Urgency: - The first step as suggested by Kotter is establishing a sense of urgency within the company. In simple words, assessment of the situation is conducted in this step. The assessment of the market clearly suggested that there is a serious decline in the leisure travelling activities. Furthermore, reduction is profit margins also became evident. Step 2: - Formation of a strong Association: - Virgin Blue in this stage should create or form a committee who will be responsible for leading the change. The company is recommended to form the committee that comprises of both people from management and technical backgrounds. As this will in both formulation and implementation of the strategy. Step 3: - Development of a vision strategy: - Virgin Blue in this step should develop a vision as well as a strategic plan for themselves. The vision of the company must be enhance the market share and along with that create a good market reputation by delivering quality service at affordable pricing. The strategies recommended to the company for curbing those issues are as follows: - Growth in the domestic and International routes: - The Company should expand its domestic and international market. This can be achieved by increasing the number of fleet destinations. Moreover, making the presence in the international arena will greatly help in increasing the reputation of the company. Launching of new reservation systems: - The Company is recommended to launch new reservation system in the form of kiosk selling and online booking. These two new modes will allow the company to reach out to mass population. Reforms in the Service Offerings: - In addition, new service offerings will also help the company to attract more customers. Reducing the Cost: - Although it is not possible for the company to reduce the prices, but the company is recommended to reduce the overall cost of operation. In addition, entering into a treaty with the oil suppliers will help the company remain cost effective. Step 4: - Communicating the changed or new vision: - Communicating the strategies of the company is also another vital aspect for ensuring effective implementation. The company should provide this responsibility to the committee to communicate the changes. In addition, the company should also notify about the causes of the changes to the stakeholders and the benefits the company will be achieved. This will help in ensuring that the company do not face any kind of trouble or resistances from the employees. Step 5: - Removal of the obstacles: - In this step company should identify the obstacles that they are going to face and take measures to remove the obstacles. Feedback programs, opinion leaders and meetings can greatly help in serving the purpose. Step 6: - Generating short term Benefits: - Virgin Blue in this regards must try to achieve short term benefits. For example, the company should set short term objectives and must try to achieve it. This will help the company to gain a moral boost. Step 7: - Combining of the benefits so as to ensure more changes for the future: - Kotter argued that most of the organizational changes have failed as the success is affirmed too early. However to avoid such scenarios the company must attempt to win more short term goals. Step 8: - Affixing the Changes in the Culture of the Organization: - The final step is to ensure the changes become permanent. In order to ensure the same, the company should make continues efforts. In addition, the company can also showcase the benefits of the newly implemented strategies so as to gain a sense of trust among the employees of the organization. Conclusion There are several types of change take place in an organization and companies simultaneously take different approaches to manage those changes. The most important task is therefore to identify the most appropriate approach. This study tried to identify the causes for which changes in Vrigin Blue are required and also endeavored to sort out a plan that is required by the company to get rid of the issues faced by them. In doing so, the study had taken the assistance of Kotter 8 step change model. The study revealed that Virgin Blue has been facing several issues and majority of the issues are external to the organization. However, these issues are affecting the internal state of affairs of the company and as a result of that some kind of changes are necessary for the company. The issues which had been identified were reducing market share and decreasing revenue, poor corporate market, poor customer experiences, high external cost pressures and intense rivalry within the industry to name a few. Hence, it is evident that there are ample reasons for which the company should effectively bring changes to its current state of affairs. In order to surmount these issues and effectively manage the changes intended Kotter’s 8 step model was used. The company has been suggested to bring changes in both operations as well as a marketing strategy. For example, the company has been recommended to launch new business class cabins, make expansion in the international and domestic routes and initiate new reservation systems. Thus, from the study one thing became clear that change is an indispensable process for an organization and companies should assess their current status and bring in periodic changes to comply with the changing needs and want of the individual consumers and society as a whole. References Cowan, S. L. (2005). Change Management. Virginia: American Society for Training and Development. Hussey, D. E. (2000). How to manage organizational change. London: Kogan Page Publishers. Milmo, D. (2011). Oil prices pose threat to airlines' profits and survival, IATA warns. Retrieved from http://www.theguardian.com/business/2011/jun/06/airline-industry-profit-slump-oil. Mills, A. J., Dye, K. & Mills, J. H. (2008). Understanding organizational change. Abingdon: Taylor & Francis. Pugh, L. (2007). Change management in information services. Farnham: Ashgate Publishing, Ltd. Samvara. (2013). Organizational change. Retrieved from http://samvara.dreamwidth.org/584887.html. Taylor, R. T. (2009). Leading learning: Change student achievement today. California: Corwin Press. Ventris, G. (2004). Successful Change Management: The Fifty Key Facts. London: Continuum International Publishing Group. Virgin Australia. (2013a). Company overview. Retrieved from http://www.virginaustralia.com/au/en/about-us/company-overview/. Virgin Australia. (2013b). Virgin Australia History. Retrieved from http://www.virginaustralia.com/us/en/about-us/company-overview/virgin-australia-history/. Weiss, J. W. (2012). Organizational change. San Diego, CA: Bridgepoint Education, Inc. Read More