Virgin Group Case Study ( Subject of Strategic Managment in Logistics)
Category : Company Case Studies, Singapore Airlines, Virgin Atlantic Airlines Strategy, Virgin Group Papers
Virgin Group of Companies Case Study
Compare and contrast Virgin Atlantic Airway's strategic development with any other (non-virgin) airline.
According to (1980), firms are under great pressure to have modern plans to be competitive and should have adequate capability to achieve their target market share. Virgin Atlantic Airways is among the most successful business ventures of the Virgin empire owned by tycoon Richard Branson. Its strategic development is rooted on the need to surpass competitors while balancing financial resources, increased revenue and maximum productivity. As stated, Virgin Atlantic Airways is a cut-price airline that based its success in serving the lucrative traveler segment of the North Atlantic market by providing outstanding and novel customer service experience. The airline introduced luxury i.e. business travel amenities that are not offered to first-class passengers of other airlines such as state-of-the-art reclining seats, in-fight massages, hair stylists, aromatherapists and motorcycle and limo home pick-up service. Also, a luxury boat service was offered to subjugate London traffic jams. These features among others change the travel experience of customers, may it be from first or economy classes. Virgin Atlantic Airways aims to recreate the mystique of air travel through the amalgamation of one-of-a-kind in-flight luxuries with circus side-show. However, these features are imitated by various industry rivals.
The airline is awarded by various institutions for its outstanding customer service. Customer service is undeniably perfected by most Virgin business ventures. By taking in consideration the requirement to please customers, the airline management is constantly developing innovative plans and features that will further impressed the customers. As innovations play a very crucial role in strategic development of the airline, it is also noted that competition is the prime mechanism that prompts the management to improve and turn its services to excellent quality. Armed with massive publicity and established marketing communications, Virgin Atlantic Airlines continues to compete with major airlines, British Airways in particular.
The airline industry is characterized with stiff and rapid competition yet a small airline industry like Virgin Atlantic Airways is tough and maintains its strategic position in the market. Financial challenges are affecting most international airline companies yet the airline persistently manages to survive financial disaster by maintaining a competitive edge in superior service. In 2000, Branson sold a 49 percent stake of the airline to Singapore Airlines for £600 million for the intention to increase financial capability to emerging divisions of Virgin group. While the airline was generating a strong positive cash flow, the transition from profit to loss during 2001-02 placed considerable added pressures on the group. This condition resulted to new management plans to be implemented including the doubling of size of airline’s fleet, hiring of 1,400 new employees, and offering alternatives against major competitors.
The enduring success in the strategic management process of Virgin Atlantic Airways is not possible if not for the ingenuity of the concept of their vision as a team. The aims of the whole Virgin business ventures in making a difference in their area of operations are deliberately directed to the top. Thus, they consider organizational planning and decision making as extensive processes. Generally, Virgin uses the forward planning technique, which according to (1992) provides an opportunity to ask the questions like: where are we? how have we got here? and what are we here to do? This kind of planning helps the management in establishing a set of organizational or functional objectives to provide depth to the mission statement and reflect the diversity of the company’s responsibilities. These describe the objective and the purpose of the whole company. All in all, the strategic development of Virgin Atlantic Airways is directed to the eventual positive and sustainable progression and overall competitive advantages.
In contrast, the British Airways considered Virgin Atlantic Airways as its major competitor. Due to the deregulation of the European Airline, many airlines have been able to cope with the changes and make a strategic move of entering in this travel industry. One of the industries that open its market to the airline industry is the British Airways (BA). British Airways is regarded as one of the UK’s largest international scheduled airline. It is known for being such because of the strategies imposed by the management of the airline industry.
One of the strategies utilized by British Airways is its ability to efficiently promote its brand names all over the market place. This strategic promotion has made the airline industry to continuously be known locally and internationally when it comes to travel satisfaction and convenience. Another strategy that can be attributed to British Airways as a whole is its ability to value their customers. Herein, the company has been able to follow other airline industry to cut their service cost while providing excellent service to their target market. Lastly, the ability to strategically align modern technology and it business strategy is the most important strategy that can be attached to BA.
British Airways has competently position its place to be known in both cargo flights industries and passenger flight industries not only in the European community but also in the international level. In addition, with its strategic used of the concentric diversification which lead British Airways to acquire Go Fly, the company has reduced the cost of marketing entry but increase the profits of the organization as a whole. The acquisition to enter the airline industry to target individual passengers who wants a low cost but excellent service has made British Airlines the number one competitor in the aviation and airline industry.
Virgin Atlantic Airways and British Airways will always be compared to water-and-oil in terms of competition. Yet, it is recognized in the analysis that they constitute similar commitment of providing maximum customer satisfaction, massive marketing communications activities and brand strategy, technological innovations, and strategic management. Most companies like Virgin Atlantic and BA, find it impossible to create any kind of sustainable competitive advantage based on product/service alone. It is common knowledge that every one of the successful companies sought and found a precise understanding of how it could create a customer-centered competitive advantage. Hessan and Whitely (1996) emphasized the idea to take advantage of the competitive situation not just by being better in how that product/service gets sold, serviced, and marketed at the customer interface. It requires that companies create breakthroughs in how they interact with customers, and design a way of interacting that makes an indelible impression on customers, one that so utterly distinguishes them from others that it becomes a brand in itself. In the end, Virgin Atlantic Airways’ and British Airways’ ability to accumulate increased financial resources and their reputation in the UK and even world airline industry is the ultimate measurement of strategic development and performance.
To what extent can the Virgin Group of Companies' strategic development be considered prescriptive?
The strategic development of Virgin Group of Companies is considered prescriptive on the level of leadership management and team dynamics. The Virgin Group has minimal management layers (2007). The management proliferate familial organization rather than hierarchy. They do not recognize bureaucracy as evident with the presence of a tiny board and absence of a global headquarters (HQ). All they have in mind is the idea of one team working towards a specified series of objectives. There is a free flow of affairs and cooperation among other companies that allows them to use team dynamics. Information are originating in diverse sources. In terms of planning and decision making, various elements are contributed by all sections of the management. Thus, it provides a wide array of resources. The principle of communalism, sharing of ideas, values, interest, and goals are considered as real and tangible formula of success. These attributes are credited to the clear proliferation and application of team dynamics and effective leadership as well as management strategy.
However, this decentralization of the organizational structure is among the weaknesses of Virgin. This is also part of the difficulties that Virgin is facing. Virgin considers this as strength but the researcher, on the other hand considers this as weakness. Because of the decentralized leadership of the company and many sub-divisions of the Virgin, there are some difficulties in the controlling mechanisms. This slows down the production processes because of the need of addressing or giving reference to the other board members and directors. Virgin will also have a potential difficulty in finding out what division is accountable for the possible pitfalls. In here, the concept of leadership and team dynamics can turn vague and stagnant.
In organizational planning and decision making, there is definitely a need to reconcile both the inside-out and outside-in capabilities. While Virgin Group’s operations management involves focusing on its core competencies with market position following its resource base, Branson and his company will be put into a disadvantageous position should they choose to neglect both the macro as well as the micro industry environment. Therefore, Virgin Group has to be aware of the latest operations management changes, as well as political, economic, legal and even demographic trends. This is for them to develop the outside-in capabilities such as market sensing, customer linking, channel bonding and technology monitoring.
Undertake a PEST analysis for either Virgin Blue in Australia or Virgin Rail in UK
The PEST stands for the following: Political, the current and potential influences from political pressures; Economic, the local, national and world economy impact; Sociological, the ways in which changes in society affect the organization; and Technological, the effect of new and emerging technology. On this case, Virgin Rail in UK is analyzed.
- Virgin Rail’s compliance to legal and regulatory policies is deliberate. Since it was formed after the privatization of British Rail in the middle period of 1990s, the company’s management adheres to the requirements specified by authorities.
- Virgin Rail is operating within a single brand yet legally and operationally, it is shared by Virgin Group (51%) and Stagecoach Group (49%).
- The profits are depended upon annual government operating subsidies.
- The government’s involvement on a step- by- step process for development is expected. The intermediary of progress would be the government itself, assisting the market by providing effective partnership and agreements with other countries.
- There is a need to review the existing company policies in order to meet the demands of the competitive business environment and the changing customer preferences.
- Virgin Rail is among the six investors in London and Continental railway (LCR) that is primarily responsible for running the Eurostar train service between London and Paris through the Channel Tunnel. It is marginally profitable in the recent years.
- The possibility of the occurrence in global recessions brought about by companies closing down and the loss of jobs may have a direct impact on its business strategy.
- Also, the unprecedented fluctuations in the local and international economy will affect the financial conditions. Thus, there is a need for increase financial management strategies.
- Operation levels are diversified taking particular attention to the competitive services rendered to the train passengers.
- As industry leader, Virgin Rail’s management trend moves toward more reliable services across their customers for efficient product and service distribution. They provide the other needs of the customers supported by their management system and personnel.
- The social responsibility of providing outstanding services for consumers is always the main priority. The company made it a point to be consistent with its mission and aim in quality service offerings through economic considerations of that the customers adhere to who belong to the lower end of the consumer population.
- The issue of environment friendliness is emerging, thus, the management launched Europe’s first bio-diesel train.
- Poor punctuality needs to be addressed.
- The poor state of Britain’s rail infrastructure affects the rail operations. The core principle of modern-industrial strategy can also be obtained from supporting infrastructures and freeing up resources as well as by facilitating interactions.
- Cost-effective and time-efficient routing patterns are subject for reassessment.
- There is a need for Virgin Rail’s business strategy to be aligned to any revolutionary technological changes impacting the industry like the balance in technology innovations and commitment to the environment.
- Virgin Rail’s technological commitment is clear through its sustainable development strategy.
Discuss the main aspirations of key stakeholders and how these have influenced the Virgin Group of Companies strategies
The main aspirations of Virgin Group of Company’s key stakeholders is to continuously expand operations in various international business locations, new kinds of business ventures, enhancing the reputation of the brand, and improving overall financial and organizational operations. As a business organization operating in various locations worldwide, Virgin’s marketing is consumer-focused. It is apparent that every major and minor decisions and plans created or implemented are based on the result of researches conducted and founded on clients. Furthermore, the services and products are something better, fresher and more valuable. Virgin bases its pricing strategies on several key trends that continuously shape the global marketplace. One particular trend was developed by Branson himself, in what he called “premium-tization”. This phenomenon causes the polarization of different markets. This would then trigger the consumers to demand and pay much higher prices for perceived quality. However, discounting in prices is also simultaneously taking place, therefore squeezing out the middle range. More often than not, businesses undergo internationalization which leads to a tighter squeeze for shelf space. So Branson thought that this will in turn leave the Virgin group as a winner. It is for this reason why Virgin group values the “premise sector” so much because this would allow consumers can to try their brands at low risk and price.
also theorized that segmentation was a key factor especially in markets where a broad leadership position has yet to be fully developed. So in these markets, Virgin group later on strived for strong positions especially in the premium and specialty segments. Good examples here include Virgin group’s leading position in the airline industry as well as in the recently established mobile stores in the United States as well as in Europe. In terms of the e-commerce culture, Virgin maintains a competitive edge in delivering ‘old’ products and services in new-fangled ways. The company’s proactive and quick implementation of actions makes them more effective and ahead of others.
Virgin Group of Company’s management plans and decides through the integration of risk-taking and research and development (R&D). Risk-taking is among the applicable techniques used by the management. It has always been an integral part of any business operation ( 2001, ). Risk is perhaps one of the extenuating perspectives when started expanding the Virgin Group people know during the 70s. With a favorable economy in 1960s when young people enjoyed numerous opportunities in education, employment, and lifestyle, he founded a magazine named “Voice of Youth.” Branson was only seventeen years old then, and the initial success of his magazine made him to take the risk of going into sale of records. Despite lacking capital to start this new business, pursued to carry on. Of course, the route towards success wasn’t a smooth one for him. Up to now, risk-taking serves as an imperative technique of Virgin in winning the marketplace battle of innovations.
In relation to risk-taking, Virgin’s every venture is based on hard research and analysis (2007). This strategy involves the indispensable role of teams. The company management focuses on R&D. Typically the industry is reviewed and the Virgin considers the consumer’s point of view. The fundamental questions (2007) asked are:
Is this an opportunity for restructuring a market and creating competitive advantage?
What are the competitors doing?
Is the customer confused or badly served?
Is this an opportunity for building the Virgin brand?
Can we add value?
Will it interact with our other businesses?
Is there an appropriate trade-off between risk and reward?
Virgin’s dedication to their continuous research makes them the leader in the growing industries despite of stiff competition. Forecasting also regulates the planning and decision making or taking of the governing bodies. Accordingly, forecasting is a rational function in the business conditions (1990).
Aside from Virgin’s reputation as a leading and respected industry in its specialized operations, there are other notable factors to consider in its success that are apparently identified in their corporate webpage. The power of the Virgin name; personal reputation; the unrivalled network of friends, contacts and partners; the Virgin management style; the way talent is empowered to flourish within the group ( 2007) are considered vital attributes of its competitive advantage.
Furthermore, all the markets in where the Virgin brand conducts business are likely to have similar characteristics. These markets, according to (2007) are composed of customers that have been ripped off or under-served, where there is confusion and/or where the competition is complacent. In this case, Virgin is able to break into and shake it up. The role of the company is to be the consumer champion, and doing this requires delivering the brand values and company strategies to the clients. Virgin’s brand values and company strategy focuses on: Value for Money, Good Quality, Brilliant Customer Service, Innovative, Competitively Challenging, and Fun ( 2007).
Nevertheless, the mentioned strategic option seems the most practical in the wake of globalization, since there is a sudden shift towards a more integrated and independent world economy. The key stakeholders too should not have any objections so long as Virgin group’s core business is not threatened. By virtue of Branson’s centralized control of its business, it is being expected that major barriers should not exist in carrying out such an option except additional time may be required given the scope and span of operations. Understanding the strategic importance of operations management is something that Virgin Group has to be familiar with. Richard Branson and his associates need to work hand in hand as to preserve the reputable standing of Virgin brand in whatever industry it operates. Only by then, the strategies implemented by such business ventures deemed effective and success driven.