Vision Mission Virgin Atlantic - Essay Example

VIRGIN ATLANTC Contents Sr.No Topic Page. No Introduction 2 1 Mission 2 2 Vision 2 3 Brief Background History 3 2. SWOT Analysis 4 pages4 3. Discussion of Key Aspects 1 page each 3.1 Does the mission Statement match the organizations strategy? Why or why not? 8 3.2 In 2010 - what prediction (as a business analyst) do you make to the organization in terms of (a) competition (b) substitute products (c) economy? How about 2015? 9 3.3 What external factor(s) is / are the greatest internally to the organization? 10 3.4 What is the greatest opportunity for the organization in the next 1 – 2 years? 11 3.5 From the basis research what is the greatest weakness internally to the organization? 12 3.6 Briefly summarize your analysis of the organization 13 Bibliography free 14 Appendix i. EFAS Table 1 page 15 ii. IFAS Table 1 page 16 iii. SFAS Table 1 page 17 1. Introduction Virgin Atlantic Airways Ltd. , is a British airlines company owned and managed by Virgin Group’s Richard Branson – with a 51% stake in the company; in association with Singapore airlines holding 49% stake. It organizes and manages flights on the long haul routes in various countries across the globe, including the United Kingdom, North America, Caribbean, Africa, Australia and the Middle East and operates from two main bases in U.K located at London Heathrow and London Gatwick. 1.1 Mission Statement The company’s mission statement (Virgin Atlantic, 2008) comprises of three long term goals: To grow a profitable airline Where people love to fly and Where people love to work 1.2. Vision Statement The company’s vision is to contribute its share in sustainable development by reducing its environmental impact and become a global leader in adopting clean fuel technology to reduce its carbon imprints. For the purpose, Virgin Atlantic along with Boeing 747 ran a biofuel commercial aircraft, successfully, for the first time in the world (Virgin Atlantic, 2007) from London’s Heathrow Airport to Amsterdam (reference). 1.3. Brief Background / History Richard Branson, the owner and founder of Virgin Atlantic owned a successful music records company – Virgin Records in the early eighties and ventured into the highly competitive airline service industry in 1984. The company brought revolutionary changes in terms of services offered to the customers and was the first company to offer personal TVs to their business class passengers. By the end of the decade, the company managed to become one of the leading airline companies in the world and had flown over a million passengers by the end of the 1980s. In the 1990s the company mostly focused on expansion activities - buying new planes, expanding its route network and even acquired a 49% stake in Singapore Airlines. Today the company is still capitalizing on its strengths by offering world class and revolutionary services to its passengers and is focused on implementing bio fuel technology to promote the environmental cause (Virgin Atlantic, 2008). 2. SWOT Analysis Strengths Differentiation based on value, service and price: Virgin Atlantic differentiates its competitive strategy by leveraging its brand equity and placing itself as a premium airline company thus deviating from the oft repeated policy of price based differentiation. It offers premium services to its customers, which are creative and innovative and hence is one of the greatest strengths of the organization. Global appeal spanning wide range of customers: Virgin Atlantic caters to a wide range of customers from the economy to the business class offering varied services including complimentary meals amongst others. It also offers price differentiation according to the time of flight chosen thus encouraging its customers to avail significant price discounts according to their preferences. Strong and Established Brand Image: Over several decades since its inception in the early 1980s Virgin Atlantic has successfully established a strong brand name to become the country’s second largest commercial aircraft company after British Airways. Innovativeness and Creativity in Services Offered: The company is a pioneer in offering unique value based services such as in flight beauty therapy, birthday cakes, public announcements, mid flight marriage proposals, and services offered at the airport lounge which includes grooming services such as massages & aromatherapy; a 5000 volume library service, gaming room, music room as well as study with latest office equipments. Weaknesses Lack of Access to Key Distribution Channels: Travel agencies today are largely affected with the change in the structure of distribution channels which now include direct sales and internet based interaction. Conventional strategies that aimed at segmenting its products / services on the basis of category of their passengers i.e., business travelers and the emerging popularity of frequent flier programs are increasingly at risk owing to the current ongoing global meltdown, threats of employee layoffs and the simultaneous burden to cater to the leisure travelers. Restrictive Marketing Strategy: Virgin Atlantic largely caters to the British consumers and is restricted in terms of expanding its global reach. The company advertises its products and services mainly through television advertisements, mailings and a variety of promotional offers both in the local as well as international markets. However the proportion of advertisements in international markets is relatively lower as compared to that in the local markets. This could lead to low brand recognition in other countries and hence prevent them from increasing their stakes in the global market place. Capturing global consumers and widening its market reach in international markets would be crucial to retain its profitability especially in the wake of global economic meltdown. Concerns over Environmental Impact: The European regulators and other corporate entities have expressed concerns over the increasing air traffic and the subsequent environmental impact in terms of rise in carbon related emissions. If the aviation sector fails to take adequate measures to curb its environmental impact the environmentally concerned customers are likely to shift to more eco friendly ways of travel thereby leading to a steep decline in the passenger traffic and hence a subsequent reduction in the company’s profitability. The additional air passenger duty (APD) levied by Gordon Brown, two years ago, for the damage caused by the aviation sector to the environment requires prompt action on the part of the current industry players in terms of stringent measures to avoid increase in costs. Opportunity Deregulation of airlines: The factors such as deregulation of airlines, loss of government control and the subsequent privatization in the aviation sector offers immense possibilities for the development and growth in terms of expansion of markets for the players in the industry. It offers easy entry for the new players and hence an eminent increase in competition which would further assist the companies in price control. Boom in Emerging Economies: The recent upsurge in the economic development in Asian countries especially India and China provides an excellent opportunity to the global players to offer their services in such countries. The liberalization policies adopted in these countries opens new avenues for international players to set up their business in the new markets thereby expanding their global reach. The airlines can also cater to the large number of Asian students who migrate to western countries including U.S., Europe, Australia and Canada for education purposes and cater to them specifically thereby capturing a substantial portion of market share. Threats Rising Oil Prices: The sharp rise in oil prices in the wake of a weakening consumer economy is seen as a major threat to the aviation industry as a whole. It has also been significant in pushing up inflation in the U.K thereby further leading to adverse economic impacts hampering their potential for development and growth. Entry of Low Budget Airline Providers: No frills airlines are increasingly making a foray into the highly competitive European markets thereby leading to increased competition causing concern to companies like Virgin Atlantic. Low cost no frills airlines flying to and from the United Kingdom include Ryan Air, Easy Jet, British Northwest, alpha one, etc among many others. Recent Changes in the Airline Industry - The BA / AA merger: The recent development concerning the merger of British Airways and American Airlines is a potential threat to the consumers since it would delegate full control to the monopoly players to push up prices and squeeze out any potential competition, and control most of the flight on major routes dominating the market with 63% on Heathrow – New York – JFK, 66% on Heathrow – Chicago and 79% on Heathrow – Boston respectively (Virgin Atlantic, 2008). 3. Discussion of Key Aspects 4.1. Does the mission statement match the organization’s strategy? Why or why not? The organizational structure of the company that forms the core of its strategy formulation is largely based on four basic principles – inspiring independence, adopting a long term approach, aggressive policies to maintain cost levels, and establishing a dedicated customer base, which are inherent to the company’s mission. Virgin Atlantic adopts policies that accentuate the principle of independence, which enhances and reaffirms its overall appeal as a leading global airline company. Their valued customers hold a central position in keeping with its mission that emphasizes on the values of fun, trustworthiness, customer care, merit and freshness of appeal. The resourcefulness and ingenuity of the company’s founder Mr. Richard Branson, which is reflected by the decorum of the airport as well as in – flight services, further accentuates the company’s appeal and is perfectly in sync with the company’s mission and hence it successfully matches their organizational strategy. The four pillars on which the company’s strategy is based has facilitated its successful accomplishment in terms of establishing a powerful and inimitable brand image, and large database of loyal and content customer base. This is evident from the giant steps the company has taken over the years in terms of capturing a respectable market share and enhancing its profitability over several decades of flawless service. 4.2. Prediction for 2010 in terms of – competition, substitute products and economy Competition: The latest event that could pose a major threat to the aviation industry in general and Virgin Atlantic in particular is the probable merger between the two of the world’s most influential airlines – British Airways and American Airlines. If the proposed deal is finalized and successfully passed it would pose a great threat to the existing players in the industry since it would capture a major chunk of the market share, dominate the skies and push the existing players out of competition establishing a monopolistic market structure. By 2010, all the major airlines would either have to close doors resulting in layoff of thousands of employees or compete in the no frills category. Either ways, such a merger would have devastating effects and would be ultimately harmful to the end consumer. Substitute Products: The current economic meltdown, rising environmental concerns and a steep rise in oil prices might force several players out of competition. The consumers are more likely to opt for eco friendly substitutes or resort to technological aides such as teleconferencing and internet, for communication and cut down on air travel altogether. However, by 2015 the airline companies are likely to achieve tremendous success in terms of finding eco friendly and cost effective alternatives such as the recent case of Virgin Atlantic’s successful use of bio fuel. This would help the companies in retaining their customer base and achieve desired market share and profitability. 4.3. External factors which are of great significance to the company As the company approaches its 25th anniversary, there are several significant changes that are likely to take place in the aviation industry. The open skies deregulation of transatlantic airlines followed by the announcement by Ryan Air to operate on the U.K. – U.S. routes is likely to create competition for Virgin Atlantic. Another significant event is the merger between British Airways and American Airways, which according to industry experts has a success ratio of 60:40, is likely to create severe setbacks for the aviation industry as a whole, significantly hampering the profitability of existing players, particularly of Virgin Atlantic. Moreover, Virgin Atlantic as a standalone airline is least likely to reap the benefits of alliances arising from its allies which include perks such as offering extended frequent flier miles to its passengers by way of onward travel. In the face of such crisis, the company would find itself burdened with mounting pressure to capitalize on its business agreements with other airlines such as Continental, Jet and Singapore in which it has a substantial stake of 49%. The advances in technology especially in high speed telecommunication are increasingly emerging as cheaper alternatives to air travels for business passengers, who might opt for such cheaper substitutes as a cost saving initiative. The recent economic meltdown might lead to increase in consumer debt thereby weakening their power to spend, added to it the rise in oil prices and the simultaneous rise in air fares might increase the cost of travelling by air altogether. This might deter the air travel to a considerable extent. 4.4. Greatest opportunity in the coming 1- 2 years Virgin Atlantic would be celebrating its 25th anniversary in the coming June (2009). In the face of ongoing adversities including consolidation and mergers in the industry, the leading British airline is confident of prosper in its niche up market category and can do so successfully by leveraging its strong and well established brand power and existing database of loyal customers. The company has posted positive results with five times more profits as compared to the previous year in the current annual report and a substantial rise in passenger number by 22%. The company has strong financial backing and a loyal customer base which are two of its greatest strengths. Virgin Atlantic has always banked on its innovative and creative streak, leading to the successful bio fuel flight in the current year. This could be the greatest opportunity for the company since it can now avail the first mover advantage and beat its competitors by capturing a larger market share. According to the latest market buzz, the company has teamed up with Easy Jet in a bid to clinch the £2.5 million Gatwick Airport deal. The Gatwick is U.K.’s second largest airport and the auction is likely to begin in Christmas. This is considered to be a major opportunity for both the airlines to secure its revenue for the long term – a boon considering the current economic downturn. Moreover the airline company can capitalize on its strong and well established brand image and with a range of innovative products and services, continue to retain its strong and loyal customer base, thereby retaining its stronghold in the British aviation sector. 4.5. Greatest Internal Weakness Virgin Atlantic is an upper class niche airline that caters to business and economy class passengers. The current economic meltdown and the concerns over increasing oil prices has led to a substantial rise in air fares deterring the passengers to opt for other relatively cheaper alternatives. The existence of several no frills airlines like Ryan Air for instance are likely to benefit from such a move and substantially affect the airline’s potential market share. Owing to the sheer size and type of business, which largely caters to business class and frequent fliers, making prompt changes in price structure would be relative difficult as compared to other low budget airlines. According to the figures issued by VisitBritain for the year 2008, tourism is a growing industry contributing to almost £76 billion annually to the country’s economy. In the wake of such an opportunity the difficulty in adjusting to price cuts might divert the passenger traffic to other cheaper airlines, thereby affecting its prospects to capitalize on the current economic trends. The recent strike by the employees of Virgin Atlantic demanding pay hikes is another cause of concern for the airline especially considering the fragile economy. In order to sustain its competitive positioning in the market the company shall have to take prompt action in order to refrain its customers from switching to competitor products or cheaper substitutes. 4.6. Analysis of the Organization: Summary Virgin Atlantic is a leading player in the British Aviation Industry and a leading brand name in providing world class innovative services to its passengers since several decades. It faces severe competition from British Airways, AMR Corporation and Air France along with several new and emerging no frills local airline companies which are aggressively vying for grabbing a considerable portion of market share. However, owing to the ongoing global economic crisis the consumer spending in the aviation industry is likely to fall and steady over the years. The following table shows the prediction for consumer spending from the year 2007 to 2012. (source: hoovers.com, 2008) Several airlines are resorting to layoffs and termination of employees as a reactionary measure to curb the rising costs. However, the financial results of the Virgin Atlantic are favorable and the company is likely to leverage its brand image to sail through the economic crisis successfully. The management at the Virgin Atlantic group is positive about retaining the customer base as well as its profitability in the coming years. The breakthrough in bio fuel operated airlines by Virgin Atlantic is a significant step in this regard which will help the company to retain its market leadership and ward off competition. Bibliography: Virgin Atlantic, (2008). Our Mission, viewed: November 16, 2008, from: Virgin Atlantic, (2007). Virgin Atlantic to run 747 on Biofuel in February, viewed: November 16, 2008, from: Virgin Atlantic, (2008). History, viewed: November 16, 2008, from: Virgin Atlantic, (2008). A monster Monopoly Consumers can’t Afford, viewed: November 17, 2008, from: http://www.virgin-atlantic.com/en/gb/nowaybaaa/index.jsp Appendices: Appendix – 1 EFAS Table External Factors Weight Rating Weighted Score Comments Opportunities Booming tourism industry 0.20 3 0.60 Annual contribution of the tourism industry in 2008 was £76 billion Expansion Strategies 0.05 4 0.20 Virgin Atlantic in might bid for the Gatwick Airport to ensure secure revenue flow Emerging Asian Economies 0.15 4 0.60 Recent economic upsurge in Asian countries is likely to open up new avenues Global Brand Positioning 0.10 3 0.30 Virgin Atlantic is a recognized brand name and hence can capitalize on its strength to sustain its competitive positioning in the industry Threats Global Economic Meltdown 0.20 3 0.60 Global recession is a cause of concern since it might severely affect air travel Rising Oil Prices 0.15 2 0.30 Might lead to increase in costs Entry of low cost airlines 0.10 5 0.50 No frills airlines are in a better position to offer cheap air fares and hence eat away into the market share of Virgin Atlantic TOTAL 1.0 3.0 Appendix – 2 IFAS Table Internal Factors Weight Rating Weighted Score Comments Strengths Price, Value, Service based differentiation 0.15 3 0.45 Virgin Atlantic offers differentiation not only in terms of price but also in terms of value and services offered Global Appeal 0.10 4 0.40 Caters to a wide range of customers Established Brand Name 0.10 3 0.30 The Virgin Atlantic brand name is globally recognized Innovative Services 0.15 4 0.60 For instance in flight beauty therapy, birthday cakes, public announcements, mid flight marriage proposals Weaknesses Lack of Access to Key Distribution Channels 0.15 3 0.45 Virgin Atlantic needs to develop robust distribution channels to boost sales Restrictive Marketing 0.15 2 0.30 Marketing Efforts are largely focused on British consumers Concerns over Environmental Impact 0.20 2 0.40 Global warming is a serious issue and governments are increasingly taking stricter measures to carbon emissions TOTAL 1.0 2.90 Appendix – 3 SFAS Table Key Factors Weight Rating Weighted Score Comments Global Brand Positioning 20 3 60 Virgin Atlantic is a recognized brand name and hence can capitalize on its strength to sustain its competitive positioning in the industry Rising Oil Prices 15 2 30 Might lead to increase in costs Global Economic Meltdown 20 3 60 Global recession is a cause of concern since it might severely affect air travel Innovative Services 20 4 80 For instance in flight beauty therapy, birthday cakes, public announcements, mid flight marriage proposals Restrictive Marketing 15 2 30 Marketing Efforts are largely focused on British consumers TOTAL 100 260 Read More