The Major Macro-Environmental Trends Facing by Virgin Atlantic - Case Study Example

? Virgin Atlantic VIRGIN ATLANTIC Assess the major macro-environmental trends facing Virgin Atlantic as they operate in the airline sector and highlight the implications on the organizations strategic decisions of the trends identified. Virgin Atlantic is a UK airline, which forms part of Sir Richard Branson’s Virgin Group. In December 2012, Delta Airlines agreed to buy Singapore Airline’s stake that will need completion of approval by regulatory authorities. The airline’s headquarters are near Gatwick Airport in Crawley, West Sussex. They use a mixed Boeing and Airbus fleet, operating between Australia, Asia, the Caribbean, Middle East, Africa, North America, and the UK from bases at Heathrow and Gatwick airports. Virgin Atlantic also operates domestic flights in the UK from March 2013. Virgin Atlantic had 5.3 million passengers in 2011, which makes it the 8th largest airline in the UK. Political influences Tax policies have influenced the airline heavily over the years. Because of its globalization strategy, the different tax policies used by different countries have had an effect on costs. Increased environmental demands by environmentalists have forced Virgin Atlantic to reduce cargo weight and aircraft weight to reduce pollution. This has made Virgin Atlantic research into bio-fuels. Employment laws have also been tightened following cabin crew strikes. In addition, terrorist threats have made Virgin Atlantic take out insurance policies for their crew. Economic factors There is an increasing trend where majority of countries are seeing decreasing GDP because high unemployment levels and high living standards. This has seen decreasing numbers of clients for Virgin Atlantic. The recent recession has also affected consumer frequency and forced Virgin Atlantic to reduce flights. High exchange rates have also affected Virgin Atlantic due to increased oil prices, resulting in increased airfare. Finally, the increase of interest rates because of slow economic growth, which has seen Virgin Airlines increase airfare because of increased payments on overdrafts and loans. Social factors Various countries practice different religions, and this has made Virgin Atlantic take their staff for training to handle different clients with differing religious beliefs. With different age groups of consumers, Virgin Airlines has installed entertainment for children going on holiday, for instance. Virgin Atlantic, because of its globalization strategy, has also had to train its staff in different languages because of the global nature of its clients. Finally, Virgin Atlantic has undertaken various social responsibilities like slum upgrading in Kenya and home sanctuaries for white rhinos and other endangered species. Technological factors These factors influence the lowering of entry barriers for new services and reduction of minimum efficient production. Some include R&D, for example, because of the increased air pollution, Virgin Atlantic undertaken research on the bio-fuel use. In addition, they have also introduced office equipment with internet facilities to cater for business travelers. Technology has also enabled them to communicate with clients, for example, for booking of flights. 2. At Corporate Level there are alternative strategic options for growth that an organisation can take in terms of choices about products or markets. The Ansoff Matrix can be used to identify various strategies that could be adopted by an organisation to pursue growth. Using the Ansoff Matrix, and making reference to examples, evaluate the various strategies that Virgin Atlantic could consider in order to pursue growth to develop their competitive position. Of the four market/product strategies that Ansoff identified, the strategies that Virgin Atlantic is implementing are market expansion or penetration and development of products. These specific strategies come with low risk levels and medium levels of risk for Virgin Atlantic as; indeed, it does for all other companies. The evidence for the strategy of market penetration for Virgin Atlantic can be seen in their focus on domestic markets in the countries that they expand into, for example, Australia. Virgin Atlantic also displays the commitment they have to expansion of their markets in their adopted strategy line, for example, within the consolidation in 2011 to Virgin Australia where they aim to become the airline of choice. There is also evidence of product development strategies, for example, in their focus in modifying and rebranding the product and image of Virgin Atlantic to appeal to travelers in the corporate market. Product development strategies used by Virgin Atlantic is inclusive of distancing them from their traditional image as a low cost carrier, as well as moving towards an image that correlates to a business market that is high yielding. This strategy is inclusive of the upgrading of airport facilities and lounges and aircraft interiors, as well as the introduction of features like concierge services and valet checks. 3. Evaluate the usefulness of the value chain in analyzing Virgin Atlantic activities and demonstrate how it can contribute to adding value in each of the areas. Primary activities Inbound logistics As part of Virgin Atlantic’s efforts to improve supply chain logistics, they were the first to implement RFID tagging technology for tracking of assets at Heathrow airport. Virgin Atlantic is also linked with Boeing, one of its suppliers, through airplane health management systems. This system is environmentally friendly and allows them to monitor and gather critical in-flight data. This excellent system of control in this industry values quality and safety. Virgin Atlantic also deployed proactive operations management systems for superior flight planning support and superior global information on the weather. In addition, Virgin Atlantic has also implemented environmentally friendly operations to achieve a competitive advantage such as being the first to use fair trade chocolates, coffee, and tea. Virgin Atlantic’s aircraft seat covers are also recycled for the production of fashion bags. Outbound logistics Outbound logistics deals with the distribution of services or products to buyers or customers. Virgin Atlantic teamed up with NIIT to offer the fastest check-in for the upper class wing at Heathrow. Therefore, upper class passengers can walk from their car to the clubhouse. They have also upgraded their website security using SSL certificate security, which provides visual reassurances for clients by assuring that they have secured their highest standards and increasing client trust. They also invested ?10 million to boost their value adding benefits for the business class travelers. They utilized the internet, cinemas, and TV to carry the campaign. The first class customer service is constantly improved and superior to attain competitive advantage. Support activities The organization is an equal opportunity employer, for example, by giving their staff free flights in a year to any destination. In addition, the CEO ensures a sense of fun among their workers, which makes them work without undue pressure. Their suppliers are audited using sustainable procurement policy, which sets out conditions from ensuring no child labor in goods they purchase to reducing their supply chain’s environmental impact. They also have a culture to enhance innovation and creativity, for example, with technological innovation permeating all aspects of their operations, including e-invoicing solutions and airline decision, support solutions. 4. Analyze the extent to which Virgin Atlantic use techniques and policies such as Corporate Social Responsibility (CSR) to satisfy stakeholders’ expectations. The aviation sector has been criticized for a long time with its generation of greenhouse gas emissions, as well as their involvement against the global warming phenomenon. While the emissions from aircrafts in comparison to road vehicles and locomotives are small, this is approximately 3% of the global total; it highly impacts on the climate because the emission from aircraft is released in the high atmosphere. These concerns about the environment, coupled with oil price surges, have compelled the airline industry to look for cheaper and cleaner alternatives. Bio-fuels are a promising alternative to oil. Virgin Atlantic, in 2008, became a pioneer in the airline industry by flying an aircraft that was partially powered using bio-fuels. The Boeing 747 powered by bio-fuels flew, for over 320 kilometers, to Amsterdam from London with one engine using a blend containing 20% babassu and coconut oils and jet fuel based on petroleum. Virgin Atlantic also unveiled an investment of $400 million to build, in the United States, what is to be considered as one of the largest bio-ethanol plants in the world. Read More