The History of Virgin Blue Company and Its Competitors - Case Study Example

Comparative analysis of the history of Virgin Blue company and it competitors Virgin Blue was first launched in August 2000 with only two Boeing 737-400 Aircrafts leased from the then sister Airline Company called Virgin Express initially offering only seven return flights every single day between Sydney and Brisbane. The name virgin Blue was a transformation from Virgin Australia as it was before. The timing of the airline to enter into Australian market was so fortunate since the company was able to fill the bigger vacuum which was created due to failure of Ansett Australia airline in September 2001. This enabled virgin Blue to grow rapidly and became the second largest domestic airline carrier in Australia. Air New Zealand on the other than, is a flag carrier and one of the national airline companies located in Auckland, New Zealand; This airline operates a number of scheduled flights to 24 international and 26 domestic destinations in 15 countries across Europe, Oceanic, Asia and America. It is a member of the star global Alliance having joined in the year 1999. It was originally known as Tasman Empire Airways Limited; where the government of Australia was in ownership by the year 1965. Latter the name changed to Air New Zealand as it is called today. It operates along haul fleet consisting of Boeing 747,767,777 as well as Airbus A320 aircraft on international routes. Qantas airline is one of the Australian airlines based in Sydney Australia. This airline is the oldest continuously operating airline in the whole world. Currently the airline is considered to be a four star airline. 2) Summary of current political, social, legal, economical and environmental issues influencing the company Political/ Legal The legal/political segment is an arena were the interest groups and the organizations compete for resources, attention and voice of overseeing the law and regulations guiding the various interactions among nations, This represents how organization try very hard to influence the government and how the governments control them. For instance Blue Virgin is concerned about all the government regulations that affect the business as a whole. This helps the company to effectively achieve its goals considerably since political and legal environment are business friendly to the company (Lowe 2008, P. 126) Social Social-culture is concerned with the society cultural value and attitude. Since attitude and values forms the main cornerstone of the society, then they often drive economical, political/legal, technological and demographical changes and conditions. This market segment has a direct effect on the overall performance of the company as it relate passenger who use the companies services from different cultural back grounds with varying attitudes (Robinson 1997, P. 31).. Economical Economical environment refers to the direction and nature of the economy in which a company competes. A firm must forecast, scan, monitor and assess the health of its economy so as to have a higher advantage over competitors in the same economy. As for the case of Blue Virgin it is important to analyze the economy before coming up with any decision that would help it to achieve its goals in such a competitive environment. Technological This includes activities and institutions involved with translating and creating knowledge of new services and various brands in the market. The benefits of these efforts suggest the findings by early adopters of new technology to help in achieving a greater market share as well as high returns. For instance Blue Virgin do verify that the it is continuously scanning the external environment in order to identify the potential substitutes for technologies that are being used and also acquiring new technology which gives it a very high competitive advantage over its competitors (Lowe 2008, P. 126). Environmental The general environment of Virgin group t is composed of dimension in the broader society which influences the company as a whole (Park 2001 P. 134. In this environment, there exists global and local market environment. Virgin group is able to get into business and diversify of its operations ones it understands the nature of environment it is operating in. For example in a global environment where it operates in, there are more opportunities to obtain more resources needed for success. 3) SWOT Analysis Internal and external (shown in a 4 quadrant diagram) Strength Weaknesses Superior technology Good network with passengers Managerial experience Comparably cheap flight price Lack of promotion experience Lack of sufficient working capital Technical obsolescence Insufficient staffing Opportunities Threats Few and weak competitors Rising income of the target market The growing demand Technical assistance available Favorable government policies Low interests on borrowing Changing government regulations Restrictive labor forces Too much competition Government bureaucracy Competition from other companies High government taxation High risk in the flight industry 4) Comparison of the financial statements There is no particular financial instrument used to measure the potential success of an airline. The best measure to consider is, the market share value enjoyed by a particular company. Financial leverage figure, dividends paid, the new issued shares and the capital reinvested to raise capital can give a misleading perception on the airline health and financial soundness. This is because airline industry is one of a high investment and high risk return business. Therefore an airline would opt to own as well as operate in its own stable hub airport facility if it can afford. Thus, the comparative analysis highlights a significant trend in the entire airline networks, business strategy and financial management. Virgin Blue can comfortably use this analysis trend in developing its long term competitive strategy. The two national airline Qantas and Air New Zealand, have an ageing fleet ages that could be used use book value which is higher than the actual market values. Compared too these two, Virgin airline has an average fleet age, though it needs to replace its older aircraft so as to continue winning and maintaining the current image Capital structure. Due to the nature of infrastructure required for an airline so as to operate the amount of financial investment and quantity of cash required to operate are very high as compares to other industries, this is because, the airline industry attributed to higher risk proposition for the investors but may yield a higher gain. Debt: the comparative observation shows that, Virgin Blue’s total debt is made up of bank guarantees, letter of credit and availability of aeronautical financial facilities. Qantas debt is composed of Loans, high purchase agreements and financial leases, where as Air New Zealand debt is composed a combination of borrowings, bank overdraft and financial leases liabilities as well ads convertible notes issued to Qantas. Equity. Virgin Blue and Qantas have a high comparatively debt to equity ratio which is much cheaper to finance the company growth, though at a higher risk, where as Air New Zealand has lower debt to equity ratio which shows that the financing is likely to be made from a high ratio of equity to common stock. Financial Management Qantas, Virgin Blue and Air New Zealand all operate with similar current ratio, which indicate that more their existing capital could be easily re-invested to generate more cash flows into the business. Despite the similarity in the current ratio, Virgin Blue still enjoys it competitive advantage over the other two as it doesn’t use more of it current cash to service things like loans and other obligations as seen in those other companies. 5) New Mission statement to reflect the future direction A mission statement describes the target sets out boundaries fort allocation of resources and what operational and strategies should be set by an organization. This statement should acknowledge the companies overall strength and inform all the employees where to specifically direct their effort to effectively take advantage of the organization strength. Virgin Blue being the company in question, then for it to continue enjoying the competitive advantage in the Australian market. The following mission statement should be considered by managers when making their future plans; To be involved in good corporate customer around the world by treating them with courtesy and honesty besides respecting and preserving the environment. This will help it to prove to be the worldwide leady in airline industry. 6) New value statement to reflect the future direction Value statement usually governs the operation of a company and its relationship or conduct with customer’s society at large local community, employees and stakeholders. When this statement clearly set, the company will be able to enjoy a better business environment despite the many challenges exhibited by competitor. 7) Three strategic objectives for the next three to four years Business st6rategic objective is normally set in terms of what to achieve in long term or in short term (Castles M 2005, P. 27). They may cover the business as a whole including things like diversity, acquisition plans and organization growth. This objective should relate to the requirement and expectations of all major stakeholders, and employees, thus it should clearly reflect the underlying reasons for running a business. It covers profitability, growth, technology and markets. In the coming three to five years, Virgin Blue has to consider the following three strategic objectives; The company internal cash flow will be used to fund future growth New Airbuses will progressively replace the existing ones in the next three years. All assembling work if need will be contracted out so as to lower expenditures. 8) Develop two key strategies for the next three to five years The increasing benefits of strategic management might be due to several trends (Mark S. 2000 P 46). This can be attributable as a result of increasing competition in various industries has made it very difficult for other companies to compete. The cheaper and modern transportation has lead to global awareness which has contributed to strategic management process. (David 2000, P 12) The result from SWOT analysis is a basis for developing goals; mission and strategies which are; The company to take advantage of environmental opportunities and the organization strength Virgin Blue Airline should neutralize or overcome environmental threats and organization weaknesses. Ones these key strategies are formulated, then the plan for implementation should be established and then carried out to achieve the business objectives Biography Park, J. 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Dock, J., M. (2011). New Trend and Developments in business Law description, Career as new trends and developments in Business strategy. Read More