Virgin Atlantic A Premium Brand - Assignment Example

 Executive Summary Companies around the world are trying to capitalize on the opportunities created due to globalization. The following study will analyze the competitive strategies of Virgin Atlantic. Virgin Atlantic is an airline company. To determine the competitive strategies of Virgin Atlantic the Porter’s Generic model has been used. After the strategy analysis the study has evaluated the competitive strategies of the company. Finally the project ends with the proper conclusion and recommendations. This research will help us to find the advantages and the limitations of the competitive strategies of Virgin Atlantic. The findings will in turn help the company to adopt future strategies and achieve the objectives. Table of Contents Table of Contents 3 Introduction 4 Identification of Competitive Strategy 5 Porter’s Generic Strategy 5 Evaluation of competitive strategy 7 Advantages 9 Limitations 10 Conclusions 11 Recommendations 11 References 14 Introduction Airline industry is one of the fastest growing industries of the world. Airline industry is playing a major role towards the growth of the world economy and also helping to increase tourism activities (Babu, 2008). The concept of high quality and money worthy airline was introduced in 1984 (Companydatabase, 2012). Virgin Atlantic is world’s first luxurious airline established by the founder of Virgin Group, Richard Branson. Virgin Atlantic is headquartered in West Sussex, UK. Nowadays the company is operating globally. For example Virgin Atlantic provides airline service in countries such as Australia, Caribbean, China, Hong Kong, India, Japan, Nigeria, South Africa, Dubai and USA. At present Virgin Atlantic Airways has a fleet of ten Airbus A330-300s, Four Airbus A340 aircraft and five Boeings 747. They already have ordered six Airbus A380 aircraft which will be in operation from the year 2015. The company also operates with cargo flights in some countries of the world. Apart from that, the company has also entered the hospitality industry in 1984 and launched Virgin Holidays. Virgin Holidays is tours and travelling venture that operates in the new Virgin Atlantic routes such as Orlando, Miami etc. (Middleton, 2012.). Some of the major competitors of Virgin Atlantic are British Airways, Air France, and Fly Emirates. Presently, the employee strength of Virgin Atlantic is around 9000 worldwide. Last financial year Virgin Atlantic earned £46.8m revenue while their annual turnover is around £2m. Virgin Atlantic is acknowledged globally for its excellence in services to the customers and the unique promotional strategy (Virgin-atlantic, 2012). Through this report the competitive strategies and core competencies of Virgin Atlantic airline will be uncovered. Identification of Competitive Strategy In this age of globalization, a company has to deal with large number of competitors and the intensity of rivalry is also increasing day by day (Westerfield and Abbink, 2004). To become the market leader, an organization has to increase its capabilities and focus on its core competencies. At first, it is important that companies should set their objectives clearly as the company can get the desired output only if the objectives are clear and measurable. However, it is also important that to achieve those objectives, business and competitive strategies should be properly formulated and implemented. To compete in a particular business environment, every company has to develop competitive strategies (Hbs, 2012). Now in this context, i.e. to uncover the competitive strategies of Virgin Atlantic, Porter’s generic strategy will be used. Porter’s Generic Strategy Michael Porter has described about three strategies to determine the competitive strategies of a company (Eldring, 2009). Similarly, using this model the competitive strategy of Virgin Atlantic will be also determined. The following is the diagram of the Porter’s generic model: (Source: Mindtools, n.d.) The Cost Leadership Strategy The cost leadership strategy has two broad categories. One is the cost reduction, which is about reducing the cost to earn more profit. The other one is increasing the market share by cutting down the prices of product or services. In this kind of strategy the quality of product or services might go down. According to the findings, Virgin Atlantic did not apply or practice cost leadership strategy. They believe in quality services to maximize profit and increase the brand awareness. The company does not compromise with the services which are being provided to the passengers. So the cost leadership strategy is not the competitive strategy of Virgin Atlantic. As an example the international and domestic fare of Virgin Atlantic is higher than British Airways. However Virgin Atlantic offers the passengers with various quality services which are not provided by the competitors (Monti, 2007). The Differentiation Strategy To differentiate the product or the services, companies generally use these strategies. Virgin Atlantic has perfectly used this strategy from the early days. To develop their current competitive activities Virgin Atlantic has applied few unique strategies. It is the first airline company to have introduced TVs in business class flight. The company also has presence in different sector of business. For example, it also operates in the hospitality sector and logistics sector. Virgin Holiday is the first Leisure aircraft which is a brand extension of Virgin Atlantic. Presently Virgin Atlantic Cargo is operating in more than 60 countries and they have large number trucking partners. Apart from that, Virgin Atlantic also offers several other additional products and services to the customers. The Focus Strategy The focus strategy comprises of cost focus and differentiation focus. The cost-focus strategy emphasizes on the cost minimization within a particular focused market. On the other hand differentiation-focus strategy stands for the strategic differentiation within a particular focused market. Companies use focus strategy as a niche marketing tool by understanding the current market situation and the potential customers within the market. Companies develop this strategy by targeting a particular market segment. This strategy cannot be matched with Virgin Atlantic’s strategies as the company targets various customer segments. The company offers both luxurious as well as low cost airways, which allows them to target mass audiences. As an example Virgin Holiday is the most luxurious Leisure aircrafts and Virgin Blue is the low cost airline which operates in Australia. Moreover Virgin Atlantic has three type of passenger class in aircraft upper class, premium economy class and economy class, which clearly portrays that the company is focusing on various customer segments of the society. Evaluation of competitive strategy From the above research work it has been clearly identified that Virgin Atlantic employs differentiation strategy to deal with the competitors. It is the first airline company which launched individual TVs for their business class passengers (Branson, 2011). Following its footsteps, several other airline companies also started to offer such kind of entertainment services. To cite an example, India based Kingfisher Airline copied this strategy. Virgin Atlantic is also the first airline company which entered in the hospitality sector, and formed Virgin Holidays in the year 1984. Today Virgin group has tie-ups with different resorts of the world. The strategy is also unique because people who are travelling in Virgin Atlantic across the globe in Virgin Holidays can get discount if they stay in the resorts which have tie-ups with Virgin group (Stone, 2012). This kind of leisure discount actually attracts the foreign travellers. This clearly shows that the company offers different products and services to the customer. Apart from the aforementioned services, the company has launched three different passenger classes in the aircraft. The classes are upper class, premium economy class and economy class. Keeping the luxury factor in mind they had formulated and implemented this strategy (Doyle and Bridgewater, 2012). Also this airline offers the most luxurious transfer option for the upper class passengers. The upper class passengers get the ‘limo service’, and get the opportunity to use the clubhouse. The aforementioned services are only provided by Virgin Atlantic and it acts as their core competency. This is the most unique differentiation done by Virgin Atlantic in comparison with the competitors. Apart from that, the company also underwent ‘codeshare agreement’ with some airline companies in order to ensure wide network (Hoovers, 2012). In addition, Virgin Atlantic cargo is the leading player in cargo sector. They have the strong logistic team worldwide. The strong cargo network covers 350 networks worldwide. They have global tie up with the different trucking partners. Moreover Virgin Atlantic is helping the courier companies across the globe by delivering their products on time (Plunkett, 2009). It is also the first airline company which has done the innovative social media promotion (Thompson and Martin, 2005). From the above findings, it can be clearly stated that Virgin Atlantic uses differentiation strategy to deal with competition. These strategies of Virgin Atlantic have set a benchmark for the competitors. From the above research work the following advantages and limitations can be identified: - Advantages Virgin Atlantic is the first airline that has introduced TVs in business class segment; as a result it attracted mass customers (Ellwood, 2002). The company succeeded to provide entertainment facilities during the journey. It was an innovative thought of Virgin’s management. Moreover the company also succeeded to increase the comfort level of the passengers drastically. Today they are operating worldwide, and they have operations in the cargo and hospitality sector. With this strategy the company has been able to target customers from the logistics sector as well. Other strategies like Introducing Virgin Holiday have also helped the company to target the tourism segment. In the context of Cargo sector, Virgin Atlantic cargo is providing services to more than 60 countries worldwide (Carpenter, 2000). As virgin Atlantic cargo is a brand extension of Virgin Atlantic, the company is benefitted by its huge reputation. The ‘codesharing agreement’ of the company helped to extend its network of ticketing partners. The ‘codesharing agreement’ between the airline companies allows them to sell tickets of each other. It helped to increase the customer base. Virgin Atlantic shares this system with Singapore Airlines, Virgin Blue (a venture of Virgin Atlantic). The innovative promotional activities through Social media, print media, and internet have created the brand awareness in customer’s mind globally. In cargo sector they have a strong logistic and supply chain management team, which helps in development of international Trade. Limitations Every strategy has some kind of limitations (Botten, 2009). Now, this section will underpin the limitations of Virgin’s strategies. The concept of less number of aircraft is the biggest limitation of Virgin Atlantic Airways. Targeting the upper class segment can hamper the brand loyalty, because the biggest competitors of Virgin such as British Airways in UK, South West Airways in USA are targeting the middle class people as well. In addition, British Airways and South West Airline offered discounted tickets or the low price tickets to customers, which allowed the company to penetrate the market. Due to such level of competition and saturation of the market, Virgin Atlantic has failed to set up a proper pricing strategy (Johnson, Scholes and Whittington, 2008). The application of ‘codesharing contract’ has some limitations also. Although they are getting high customer base but they cannot enjoy 100 % profit repatriation. In this case Virgin Atlantic has to share profits to the companies as well as to the countries in which Virgin Atlantic is operating. Another problem of Virgin Atlantic is flight turnaround time; they take a long turnaround time. Virgin Atlantic functions with limited number of aircrafts. This is a cause of concern for the company as for maximizing the profit a company needs to offer large number of products or offer services to the potential customers (Alain, 1993). Conclusions The analysis of the topic of study shows that Virgin Atlantic has the potential to emerge as a leading global airline brand. Airline industry is one of the fastest growing industries but the market is very much saturated because of the massive number of competitors. From above research work it can be concluded that Virgin Atlantic has implemented differentiation Strategy to deal with the competitors and work efficiently in the market place. It is a fact that they could not capture the maximum market share because they have less number of aircrafts than the competitors. Additionally, lack of proper pricing strategy and poor turnaround service are also the causes of its poor market condition (Norris and Wagner, 2010). Recommendations From the findings of the project, the following has been recommended: - It is recommended that Virgin Atlantic should introduce more number of aircraft globally. This will increase the core competency of Virgin Atlantic. Nowadays people have become familiar with the brand name of Virgin Atlantic, mainly due to its promotional campaigns. So, Virgin Atlantic has a good brand loyalty and good brand awareness globally. The introduction of more aircraft will fulfil the preference of the customers. Secondly, Virgin Atlantic is suffering from the bad turnaround services. Now, in order to get rid of this issue, the company should consider using advanced technology (Norris and Wagner, 2010). Thirdly, Virgin Atlantic has to do the proper pricing strategy to gain maximum market share, because from the past many years Virgin Atlantic is targeting the luxury market segment. This strategy is called the niche marketing strategy. Virgin Atlantic is lagging behind in terms of the proper market segmentation. The competitors like British airways has started the low pricing strategy way back, but Virgin Atlantic is adopting this strategy slowly and gradually. If these areas get improved, then Virgin Atlantic can create a benchmark in this airline industry globally. References Alain, A., 1993. Economics A Level Student Book. New Delhi: Pearson Education. Babu, A., 2008. Tourism Development in India. New Delhi: APH Publishing. Botten, N., 2009. CIMA Official Learning System Enterprise Strategy. 6th ed. Oxford: Elsevier Branson, R., 2011. Screw Business as Usual. New York: Penguin Group. Carpenter, P., 2000. Ebrands: Building an Internet Business at Breakneck Speed. Harvard: Harvard Business Press. Companydatabase, 2012. Virgin Vacations. [online] Available at: [Accessed 27 December 2012]. Doyle, P. and Bridgewater, S., 2012. Innovation in Marketing. London: Routledge. Ellwood, L., 2002. 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Oxford: Oxford University Press. Thompson, J. and Martin, F., 2005. Strategic Management: Awareness and Change. Connecticut: Cengage Learning EMEA. Virgin-atlantic, 2012. About us. [online] Available at: [Accessed 29 December 2012]. Westerfield, R. and Abbink, J., 2004. Current Issues in Globalization. New York: Nova Publishers. Read More