SUITABLE STRATEGY FOR VIRGIN ATLANTIC AIRWAYS
Introduction
The Virgin Atlantic Airways is a UK-based private international airline that started operation in 1982. Flying up to 20 destinations in North America, Asia and Africa, it is 51% owned by Virgin Group and 49% owned by Singapore Airlines ( 2006). It competes with other local and international airlines including British Airways, the biggest and leading in UK. In 2005, it posted .5B in sales and M net income with year-on-year sales and net income growth more or less at 37% and 900% respectively. With this information, it suggests firm’s bright future and industry fair share of the market. However, external and industry environment analysis is a continuous process (, & 2003) that every now and then makes prediction and preparedness an integral part of strategic actions of firms to efficiently manage opportunities and threats outside its organization.
The External Environment: PEST Analysis
In the local environment, local elections to be held on May this year could made Tony Blair’s concentration in national issues such as health and education shift into local issues such as crime, anti-social behavior and environment (Independent). As a result, transport industries including aviation should consider this early the type of their fuels and fix emission loopholes. They must research oil suppliers that sell environment-conscious fuels and test its efficiency and compatibility with aircraft engines including preparation to possible fluctuations in present fuel costs.
In fuel-related issue, the European Union resorted legal action against member countries like France, Germany and Italy of protecting their utility firms against foreign competition (Independent). As a result, prices of fuels failed to obtain efficiencies of competitive industry making oil prices for the transport sector more costly. Local aviation firms should consider this EU action significant disincentive to their cost-effective strategies because UK, unlike the mentioned countries, fosters foreign imports making oil prices for the industry cheaper. If these countries are able to liberalize the energy sector, possible cost strategy is necessary to retain the prior upper hand.
Research suggests that rural, metropolitan and London population either employed, unemployed or economically inactive dispose most of their weekly budget to transportation along with food and recreation (Business Helper). Since socio-cultural segment affects economic and political/ legal segments ( 2003), aviation industry could less be influenced by the latter outcomes despite of their ambiguity (will Blair retain position or will EU countries accept the directive) because consumers are willing to pay with little regard to price, instead, value of service. As a result, it is more strategic to focus on operations than financial structures.
Another finding show that 58% of the household population has computers while 49% of which has internet connection with metropolitan areas like London posted the highest incidence (Business Helper). This information is relevant to most huge firms like Virgin Atlantic Airways who heavily relies in e-business with its interactive website wherein customers can obtain flight schedules and book a flight with their finger tips. The other half of the population without computers can be addressed by the firm through other forms of media. In addition, it can also verify through additional scanning the prevalence of internet café in rural areas where household ownership is relatively low.
The Industry Environment: Five Forces
New entrants in the industry basically face two difficulties: barriers to entry and retaliation from present firms ( 2003) In the aviation industry, particularly the service passenger-based ones like Virgin Atlantic Airways, in modern economies are privately-operated that calls for substantial financial requirements at the fore. Since travel services are derived demand ( 2006), new entrants should be able to cut a share in the pie in the presently saturated market. This endeavor could result to another substantial resource to be deployed. However, with such new entrant engagement, it does not assure of intended results because competitors like Virgin already created strategic links to other country-routes including its alliance with Asian giant Singapore Airlines that makes it easy to create counter-strategy.
Boeing, the largest manufacturer of jetliners and supplier of Virgin’s aircrafts, had recently signed long-term agreement with largest aerospace parts distributor Satair for an Integrated Materials Management (Boeing). As a result, Boeing could reduce its inventory and minimize warehousing costs because spare parts will be provided only when needed. A cost reduction strategy from a supplier can assure customers like Virgin of price management scheme, if not, its another supplier, Airbus (the once number one airline manufacturer) could be resorted.
Competitors in the industry have the same capability in terms interactivity of their web pages like Virgin. This is supported almost fifty percent prevalence of internet connection among UK market, not to mention other countries. As a result, the power of buyers to gain access to prices and services of firms increase making them knowledgeable of distinction of one from the other. Companies on their part are obliged to be more competitive especially in maintaining and updating their web sites.
The country’s sea transport industry had developed super ferries while the 2003 recorded 17.4% increase of UK passengers who took cruise holidays that reached nearly one million in that year (). This development would make sense to airline industry tourism and leisure market especially foreigners that like to see the national endowments. With demand for airline transport rise at faster rate than supply for it, the airline industry is required to effectively allocate its resources in a manner that exploit this supply shortage.
Other airline competitors in the likes of AMR Corp., British Airways and Lufthansa are operating in at least 150 destinations compared to Virgin’s 20 (). As a result, rivalry among these firms against Virgin is relatively insignificant although strategic actions of Virgin that directly and significantly threat their market could spark retaliation in the detriment of relatively small firm. The firm should focus in its target market and avoid competing with these large firms.
The Role of Relationship Marketing
Relationship marketing (RM) is the source of marketing partnerships, strategic alliances and networks which are methods that enable independent strategies of individual entities to benefit from other benefits brought about by collaboration with other ( 2000 ). For Virgin Airways, RM can bring the company in a more formidable leadership position in a fast-changing airline environment. Although it is an innovator, absence of RM can result to hostile competition from several companies that may lead to loyalty demise of its large and small customers. The core idea behind RM is building rapport with customers ( 2000 ) that can lead to customer retention. Such set-up lead to long-term and loyal customers which are found to be less costly, have willingness to pay premium price of the product and also willingness to engage in word-of-mouth referrals to prospective customers (cited in 2002 ).
For example, the provision of Seagate’s website for marketing communication to manufacturing companies, distributors and resellers can be perceived by such clients as a way of providing excellent service leading to continuous patronage. The same effect is true to individual customer’s provision of hard drive education tutorial and distributor referral. However, there are pitfalls in RM and these are much related to implementation rather than RM strategy itself. One example is the lack of resources and deviation of corporate strategy that makes company efforts to understand RM in the point of view of customers difficult or impossible (cited in 2002 ). Without such understanding customers may not appreciate the feat and even treat it as completely negative campaigns. For example, it is indicated that catalogs and direct marketing were favorable to customers but e-mail messages are viewed less favorably (, 2002 ). Without understanding of customer needs and preference, the communication requirement of RM cannot be met.
Stages in marketing planning process
Marketing plan has five main parts; namely, marketing audit (e.g. SWOT), strategy, marketing mix to be used, marketing programme (e.g. time and event schedule) and monitoring mechanisms to be employed (1999 ). With these components, a marketing plan can decide policies for marketing mix, generate programmed and events and allocate responsibilities for specific corporate departments and entities. As failure to plan often lead to effectively planning to fail (), marketing plan is the resultant of marketing planning in which the company can achieve desired outcomes by enabling its personnel, resources and finances to be allocated in array that can be available when they are needed. In effect, marketing planning makes the firm stable, focus and competitive at times when sales drop, there is a new competitor and there is a need to increase in price due to increasing costs of raw materials.
Critical implementation notes
There are no perfect plans and implementation must be based on past experiences ( 1999 ) especially in the airline industry in which the marketplace is very dynamic. Virgin Airways may fail to act accordingly if it injects new methods even such are not tested to be successful. Since there is a need to be proactive, the company must use its learning curve from past analysis, synthesis, implementation and actual operations and their associated costs and benefits underlying. In effect, contingent action is prevented and the firm would avoid blurred marketing position. Also, there is a need to differentiate between corporate and marketing plan to avoid implementation confusion on what to do and what to prioritized ( 1999 ). Corporate plan focuses on satisfying the needs of financial suppliers of shareholders, banks and others. On the other hand, marketing plan is the vehicle that in which supply the cash necessary to contribute to the level of return on capital. As financial suppliers require lowest possible cost and risk for a high rate of return, marketing plan is a component that works on the latter requirement.
In studying the performance of new film releases, it is proposed that hierarchical behavioral model framework to assist the implementation of marketing planning ( 1996 ). The model links marketing variables such as advertising, distribution and film characteristics to the behavior of the customer. It forms the framework to link the buying/ viewing process decision for customer-based planning. In a medical-related study, promotional initiatives are conceded to be a combination of three active strategies; namely, pro-active public relations, issue-driven commentary and solution-driven marketing ( 2001 ). The first requires understating of the whole situation and relate how a certain issue affects the sales of the company. The second necessitates abrupt solution to the problem or issue so that new products under their production will benefit the first-mover advantage and customer loyalty. Lastly, the message from the two preceding strategies must solve a certain problem or issue in order for justification of marketing investment and product development can lead for the company to maximize its returns.
Conclusion
By studying this external and industry analysis on environmental facts, it could be said that Virgin Atlantic Airways is situated in standard cycle markets wherein its competitive advantage is moderately shielded from imitation. In general, airline industry belongs to slow cycle markets, however, due to relatively smaller capital and operations of some firms like Virgin, companies within this industry are unable to assure their long-term above average returns because they are relatively vulnerable to general environment (e.g. low lobbying power) and relatively unsecured to industry forces (e.g. potential entrants or larger competitor predation). As a result, Virgin should focus in a specific market niche or specific routes to obtain value other than price and survive the competition.
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