This is an executive report on Virgin Atlantic Airways, which contains an External and internal analysis of the companys current competitiveness and concludes with a recommendations on the future strategic direction

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UNIVERSITY OF SURREY

FACULTY OF MANAGEMENT AND LAW

School of Management

MSc Programmes

Module Leader:

Dr. Laura A. Costanzo

Academic Year: 2010-2011

STRATEGY MODULE

COURSEWORK


“Your airline’s either got it

or it hasn’t”

Contents

1.0        Introduction        

1.1        Company Overview        

2.0 _        The Analysis of the External of Environment        

2.1 _        The Macro-environment        

2.2 The Competitive Environment        

2.3 Strategic Groups        

3.0        The Internal Environment        

3.1        Swot Analysis        

3.2 _        Resource-Based View of Virgin Atlantic        

3.3        Value Chain Analysis        

4.0 _        Recommendation for the Future        

4.1 _        Analysing the current strategy        

4.2        Future Strategic Direction        

5.0        Conclusion        

SWOT ANALYSIS        

Appendix 2        

Value chain Analysis        

APPENDIX 3        

Table of Figures

Bibliography        

  1. Introduction

This is an executive report on Virgin Atlantic Airways, which contains an External and internal analysis of the company’s current competitiveness and concludes with a recommendations on the future strategic direction of the company.

1.1        Company Overview

Virgin Atlantic Airways Limited (Virgin Atlantic) a part of Sir Richard Branson’s Virgin group is one of Britain’s largest airlines and Europe largest transatlantic airline. It is 51% owned by The Virgin group and 49% owned by Singapore airlines.  In the first quarter of 2010, the revenue went up by 10% to £532 million (The Virgin Atlantic Press Office, 2010).

Founded in 1984, and headquarter in West Sussex, near that Gatwick Airport, the company flies long haul to Europe, Africa, Caribbean, Middle East, Asia and North America. It is a privately owned company and as such does not publish its financial records.

Mission Statement

Virgin Atlantic’s mission statement is “to grow a profitable airline where people love to fly and where people love to work”. This mission is profit orientated, which is a vital factor in strategic decision.

Virgin has had a history of maintaining its strategic positions in Britain competing intensely with British Airways.


2.0         The Analysis of the External of Environment

By external environment, we mean factors that are beyond the control of the organization and may impact on its strategic direction, its internal processes and structure (Pearce & Robinson, 2011). The external environment consists of:

  1. The macro-environment: analysed with PESTEL (an acronym for Political, Economic, Socio-cultural, Technological, Environmental and Legal factors)
  2. The industry and competitors : analysed by Porters 5 forces framework with critical success factors and strategic groupings
  3. The identification of opportunities and Threats from SWOT Analysis.

An understanding gained from using these frameworks are useful in future strategic decision making for Virgin Atlantic.

2.1         The Macro-environment

This consists of all the factors that are beyond the control of the firm and can have a meaningful effect on the firm’s strategy (Dess et al., 2010). A PESTLE analysis shows the effect of these factors in the Airline industry.

We would examine this effect on Virgin Atlantic.

Political Factors

These are Government operating regulations within which the airlines have to work with. The Single European Sky (SES) initiative was created to serve as a regulator for Air traffic management in the European Union. The European airline deregulation has created a single market, removing restrictions from member countries and creating international competitiveness. This would mean reduced competitive advantage of national carriers like British Airways which is a good for Virgin Atlantic. However, this has also seen the rise of low-cost airlines that has increased competition for the major airline companies like Virgin Atlantic.

The recent EU-US “open skies” agreement which opens up the transatlantic route allowing all European carriers to fly to US has also increased competition for Virgin Atlantic. This is because this route was exclusive to Virgin and 3 other Airlines.

Economic Factors

Economic factors are concerned with the nature and trend of the economy in which the firm operates. (Pearce & Robinson, 2011).  The profits from the Airline industry is expected to fall by 40% this year as stated by IATA, this is due in-part by the rising oil price. (Bisignani, 2011).  Another report suggests that revenues from UK airlines Industry fell by 19.7% in 2009 with passenger volume shrinking by 7.4% the same year (Datamonitor, 2010).

Virgin Atlantic was also hit by the economic downturn of 2009, reporting an operating loss of £132m and revenues going down by 8.6% to reach £2,356.6m (The Virgin Atlantic Press Office, 2010). They however showed signs of a quick recovery a year later. Some macroeconomic indicators are shown below.

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Socio-cultural Factors

These are factors that influence the beliefs, values and culture of the society (Dess et al., 2010).

In a recent survey of UK business class travellers, 74% said children was what annoyed them most about the first class travel and they are currently clamouring for 18+ only travel. Travel experts are looking at Virgin Atlantic to start offering this service. (Business Travel and shows, 2011)

The population of the UK is ageing, with an increase of 1.7million of people aged 65 and over in the last 25 years. (Office for National Statistics, 2010). As these figures are expected to increase in the coming years, this would affect the generally reduce the number of travellers in airline business and also increase the cost of building aircrafts that would support over-age passengers.

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Technological Factors

Technology is increasing expected to contribute to the success of the aviation industry.

Also internet technology is changing way Airlines do business, with low-cost airlines utilizing it with a cost leadership strategy. However, last December amidst the cancellations of flights due to snow, virgin surpassed British Airways in its use of Twitter (an internet social network) to provide personalised customer service.

Environmental Factors

The aviation industry is one of major contributors to Carbon emissions. But the entire Airline industry under IATA is united with common goals of saving the environment. Biofuels are considered as the future way for ...

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