Executive Summary Virgin Atlantic is one Of the leading luxury airlines in the world and is a part Of the Virgin group. With Sir Richard Brannon being the CEO and the face of the company, Virgin has become a household name in both the United Kingdom ND United States. Abrasion’s charismatic personality attracts mass amounts of media attention which has helped to publicist the company further. Brannon has been able to create an empire over an extremely diverse range of industries.
From a record company to mobile phones, the entire enterprise is based around luxury and enjoyment, with an exciting airline that customers enjoying flying on and where staff are proud to be a part of the Virgin team. This group report examinations the internal and external environments of Virgin Atlantic and seeks to divulge into the fundamental factors aiding the company to be so successful.
A lot of research has been ascertained in order to obtain a full picture of this charismatic airline and to have a full understanding of their hierarchy. 2. Introduction In today’s globalizes world it is known that in order for a company to be successful within the airline industry and to compete with larger and more lucrative airlines, a constant focus on innovation as well as the ability to modify strategies and management practices is fundamental (Dry Hunter, 201 3) [Appendix 1. Research has been complied In order to ascertain the information needed to understand how Virgin Atlantic competes in today’s lobar business environment. Founded by Sir Richard Brannon in 1 984, Virgin Atlantic are a private owned company which is 51% owned by the Virgin Group and 49% by Delta Airlines (Delta Airlines, 2014). Virgin Atlantic fly to over 35 destinations worldwide and carry over 5. 5 million passengers each year.
Now a household name, it is evident that Brannon has created a strong brand image for Virgin Atlantic, a company which has been described by many of its customers as a “fun-loving, vibrant, sexy yet chic airline” admired for the friendliness of staff and customer service (The Economic Times, 2014). Recently winning awards such as “Best Airline Lounge” and “Best Long Haul Airline”, the future of Virgin Atlantic is expected to be lucrative with the delivery of 16 Boeing 787 Dreaminess over the next two years (Virgin Atlantic, 2014).
Analyzing the rapid changes in the global business environment, this group report seeks to understand how Virgin Atlantic operate as an airline, how the airline differentiates itself from competitors and to assess what changes the company have had to make and may have to make in the future in order to continue growing. 3. Literature Review In Order to understand Virgin Atlantic as a company on a global scale, a clear understanding of the “global business environment” is crucial. The global business environment is described by David Conklin as “The Forces outside the firm’s traditional boundaries… Important in determining the firm’s success. These forces in ‘the environment of business” differ among nations and over time, continually confronting the firm with new issues that require modifications in strategies and management practices” (Conklin, 2011 Over the years, Virgin Airlines have had to face the ever changing business environment by continuously working on development and innovation. Many companies have suffered at the hands of the global business environment and it has been ascribed to “… Lack of understanding of the legal and cultural environment leading to most of the failures. ” (Carlson, 2013). However, Brannon sees these constant fluctuations as being advantageous for the company, stating that “… Any changes in the global business environment have, and will, only ever help us to do bigger and better things. ” (Brannon, 201 1). One of the most significant findings to come from this group report as the growth of the air freight market, thus providing Virgin Atlantic with more opportunities to create higher revenues.
The second major finding for the long term interests of the airline was that with the aging growth rate progressing in the UK, elderly loyal customers of Virgin will decline, due to new tourism company’s constantly coming into the travel industry such as Saga Holidays, Cruises and the constant promotions and special prices for these elderly holidays that are taking customers away from the major airlines. After analyzing Virgin Atlantic we found that the airline have a strong market hare in the airline industry even though they stand alone, unlike their main competitors British Airways who are a part of the One World alliance.
On the other hand we found that a main threat to Virgin Atlantic are the continuous rise in fuel prices which is being handed down to the passengers in terms of ticket prices; It can be argued that this is having a major adverse effect on the airline because we are seeing a heavy decline in First Class and Business Class tickets being sold and for an airline; this is crucial because most of a flights money is made by selling these seats. It is widely known that Brannon being he face of Virgin Atlantic is very important with the brand image and awareness.
It can be argued that Virgin Atlantic is the most recognized airline in the world due to their brand awareness. These findings suggest that in order for Virgin Atlantic to have continued success, new ideas need to be put into place to create new revenue streams such as new promotions and deals. The evidence from our research shows us that it could be a successful move forward if the airline creates much cheaper deals for the elderly and retired, in order to keep that business instead of losing it to cheaper holidays in the ravel industry.
Another important finding was that Virgin Atlantic are already in the process of sourcing new and more efficient fuels for the future running of their aircraft which is cost effective, various types of fuel have been created, but the most CEO-friend fuel So far which is in use is bio fuel. 4. Methodology This research took place in Middlesex University on the International Business and language programmer from December 2013 to February 2014. The report was composed by a research team of 5 members. The group collected secondary data for the report via a number of sources. Books from Middlesex
University Library were used in order to assist the group in understanding the information gathered from a theoretical point of view. Databases such as “Business Source Complete”, “Keynote” and “Passport GIMP” were used in order to obtain relevant industry and company information. Each of the group members read the information gathered noting the important aspects and drawing from the information provided in order to create the report. The process took 12 weeks on campus. During the first 2 weeks, group members were assigned to allocated roles and each individual collected data relevant to the role.
Throughout the subsequent weeks, the information gathered on the internal and external business environment of Virgin Atlantic was then analyses using SOOT Analysis, PESTLE and Porters 5 Forces. Whilst the group did encounter some challenges in terms of the allocation of roles and meeting times, the group managed to collaborate and reach agreements which suited each individual. The report was ready to write by the beginning of February. A total of 22 sources were used, of which were online articles, newspaper articles from the Financial Times, books and journals.
Issues arose surrounding the design of the research while trying to retrieve information from the database chosen as it had been quite difficult to obtain up to date information. Therefore the group felt that there was a need to gather the majority of required information elsewhere such as the Virgin Atlantic website and news reports from sources such as the Financial Times. 5. Results and Findings 5. 1 . SOOT Analysis During the research process, a SOOT Analysis was conducted in order to analyses the following four aspects relating to Virgin Atlantic from its interior and external environments. 5. PESTLE Analysis In addition, the PESTLE framework was used evaluate and understand the impact Of external factors that affect Virgin Atlantic. 5. 3 porters 5 Forces The third analysis tool used was Porters 5 Forces. This was essential in providing key information regarding where the power lies within the business, to help analyses the company and the industry, identifying key problem areas and eventually guiding the investigation to a successful business strategy development. 6. Interpretation and Analysis Drawing from the information found in the SOOT Analysis, it is evident that Virgin Atlantic have a strong brand image.
Additionally, the company have been able to lean against the ‘Virgin Group” brand where Brannon states that most people know the Virgin brand better than the names of the individual companies” (Lee, 2010). Virgin Atlantics ability to deliver on quality and customer service assisted the company in being trusted and loved by the public (Aimed, 2010). Furthermore, the values of the company have helped to build up its image in the public eye throughout the years, being known for service quality, innovation, fun, and rule breakers (Seeded, 201 3) help the company to stand out from other airlines.
In respect to the company’s strong branding and values, it has also allowed for innovative PR Stunts to take place hen launching new ideas or when expanding to a new location. However, it may be argued that by crossing the line with what is considered “funny” and what is considered inappropriate or disrespectful to the general public is a risk, even for a brand with a tongue-in-cheek reputation and CEO (Daily Mail, 2013). However, whilst the brand image of Brannon is an immense asset to the company, it could be argued that the brand may be too focused around one individual.
It is crucial for Virgin Atlantic to have a comprehensive succession plan in order to ensure the survival of the company (Larker, 2012) after Brannon. It has been found that “the price of a company tends to go down following news of a Coo’s stepping down/passing if the CEO is seen as a strong leader or vital to the company, and it tends to go up fifth CEO is seen as a poor leader or not a familiar face to the general public. ” (Salsas, J, 201 2) [Appendix 2. ] An interview with Virgin Groups COM, Ian Redden revealed that he company have made plans in the event that Virgin is not be led by Brannon.
It was expressed that these plans “represent the great complexity that is the virgin brand”. The main focus being that Virgin wish to continue to as “the biggest brand or the world’s best known brand but to be the most irresistible brand in the world” which would allow for Virgin Atlantic to thrive “consistently in the absence Of Richard” (Beyond Brannon: Ensuring Virgin’s Success Plan, 2014). Virgin Atlantic have achieved reaching their target audience thus far with upper class passengers earning an average of SEEK per annum, predominately traveling on business with the airline (Virgin Atlantic, 2013).
The company is the preferred airline of higher paying customer I. E. Corporate, upper middle class and middle class (Tuttle, 201 2) ND reviewing the financial data for the last 5 years, it is evident that whilst Virgin have high operational costs, it is a lucrative airline with a positive turnover ratio [Graph 1 . ] Graph 1 . 2009-2013 Turnover & Net Profit Diagram After ascertaining the financial information of Virgin Atlantic, the results displayed that the airline is profitable, however; it is worth noting that the turnover is extremely high in comparison to net profit with the highest turnover being over EH. Billion in 201 3 and a net profit of just EYE million. This could indicate that there are high operational costs. Lack of destinations in comparison to competitors is also a downside. Virgin’s main competitors are British Airways and American Airlines. As of 201 3, AAA is ranked 3rd to have the biggest fleet in the world, and flies to 873 destinations and BAA operate in over 500 destinations around the globe (The Richest, 2013). Whereas Virgin only operate in 30 global destinations (Virgin Atlantic). With the World Cup approaching, Virgin Atlantic have the opportunity to become the carrier of the England National Team (Daily Mail, 2013).
Also With the expected growth rate of the global air freight market, the performance of the actor is predicted to increase (Boeing, 201 3), thus providing Virgin an opportunity to further strengthen and gain competitive advantage over its competitors. Following the “9/11” terrorist attacks, terrorism has posed as a major threat to the airline industry becoming a major worry to airports and airlines worldwide. Safety measures and precautions have to be carried out in great detail, which adds to Virgin Atlantics operational costs (CNN, 2014).
Another threat that has affected Virgin Atlantic has been the rise in fuel prices (Modular, J. 201 1). This has a knock on effect on Virgin Atlantics ticket prices. As jet fuel prices account for the majority of the expenses, Virgin’s margins are in turn affected (New York Times, 2011 Analyzing the external environment of Virgin Atlantic using PESTLE it is clear that political and legal factors vastly affect the environment of an organization. As an example VAT and Airport tax being charged On Virgin for instance would result on an increase of tickets’ price.
Additionally, legal regulations such as working conditions and minimum wage must be accomplished (Data Monitor, 2011 A typical example is Primary and other clothing organizations exploring less developed countries such as Bangladesh. The economic state of a country would certainly affect the performance of Virgin Atlantic, as seen with the rise of fuel costs on airfare. (New York Times, 2011) As the economy is going through a recession, it is probable to have a decrease on demand, impacting on sales as people will not be going on holidays.
Conversely, economy booming mean more customers to spend money on travels and holidays, hence increasing sales and net profitability. It could be suggested the use of new technology to implement new substitutions to fuel, making it Bio fuel for instance (Financial Times, 2010). As technology improves every day, it is a key actor affecting Virgin. Consequently, Virgin can maintain its reputation of being “Innovative”. Concerns about the environment have changed the way business operates in our days.
Virgin started to use Bio fuel to reduce of carbon gas emissions, which will help the environment. Social factors also affect Virgin’s environment. In the UK the aging population rate is growing. Consequently, sales of flights may decline, with the alternative emerging holidays targeted towards the elderly. Through Porter’s five forces analysis it is noticeable that companies in this industry are threatened with the usability of new entrants. This is in response of airline coalitions, decreasing competitors and the ease for new organizations to enter this industry.
New entrants creates more competition, increasing difficulty for companies to have a unique selling point (US? ) or even maintain sustainability in the industry. A classic illustration often cited is the acquisition of Iberia made by British Airways (BAA) (BBC News, 2010). As a result, Bag’s brand awareness was enhanced and their market share increased as they expanded into routes operated by Iberia in emerging markets such as Latin America. This highlights owe difficult would be for new entrants to gain presence as many routes and airport space are already conquered by huge companies.
All things considered, it is a fact that new entrants threat the airline industry, as the industry as a whole is similarly affected from high competitive rivalry. Competition is tremendously brutal in this industry to the point of many airlines consolidating not aiming for better performance, but most time aiming for survival. This rivalry has a big impact on airlines, as well as the need for survival, airlines struggle to achieve their aim of expansion and increased market share. The solution for these airlines is to differentiate and have an JSP.
The evidence for this is clear in the case of Virgin Atlantic as they continually gain presence in the market by differentiating their brand, being recognized as “innovative” and Urinary which it’s USPS is low cost tickets. We can state that power of buyers are correspondingly increased, as a result of competitive prices and services offered by a diversity of airlines. Subsequently, customers will impact on business decisions, demand and price. The threat of substitute products is relatively low, with no substitutes for long haul flights in terms of time and cost. Data Monitor, 2013).