Strategic Capabilities of Virgin Atlantic Airlines


 


            This paper discusses the strategic capabilities of Virgin Atlantic Airlines as oppose to its competitor, Cathay Pacific. The analysis is conducted using Benchmarking. Benchmarking against competition according to Stahl and Bounds (1991) differs from market research, satisfaction surveys, and competitive analysis. One major point of difference is that benchmarking focuses on ‘practices’ that satisfy customer needs. While market research focuses on identification and competitive analysis is usually employed at the strategic level, benchmarking’s unique contribution is examining “how” things are done to satisfy needs. Benchmarking also provides an awareness of what, how and how well competition and/or the best are doing. By benchmarking the methods, rather than simply financial outcomes or other end result measures, managers learn more about how to achieve competitiveness in satisfying customer requirements through benchmarking. Benchmarking the methods directly translates into action implications for improving systems, and lends guidance to how to improve, what to change, and what new systems or alternative practices might be put in place (Virgin Atlantic Airlines 2004).


 


Company Background: Virgin Atlantic


            Virgin Atlantic, a British Airline that traces its history twenty years ago, is considered as Britain’s second largest airline. The airline serves the world’s major cities. Virgin Atlantic as a newcomer competed with the established airlines and introduced better service and lower costs for passengers with a reputation for quality and innovative product development. Virgin Atlantic was developed as an offshoot of Richard Branson’s Virgin Group, which was better known at the time as a leading light in the world of pop and rock music. The inaugural flight of Virgin Atlantic took place on June 22, 1984. The airline’s aim was to provide the highest quality innovative service at excellent value for money for all classes of air travelers. From those early days the airline has gone from strength to strength. Now based at both London’s Gatwick and Heathrow airports, it operates longhaul services from Heathrow to New York (Newark and JFK), Los Angeles, San Francisco, Washington, Boston, Miami, Tokyo, Hong Kong, Johannesburg, Cape Town, Shanghai, Delhi and Lagos. Virgin also operates services from Gatwick to Orlando, Barbados, St Lucia, Antigua, Las Vegas, Grenada and Tobago. Virgin Atlantic also operates a service from Manchester to Orlando.


 


Company Background: Cathay Pacific


            Cathay Pacific Airways is a Hong-Kong based airline that has a comprehensive network of flights to over 90 destinations around the world. It is considered as one of Asia’s biggest and most regarded airlines. The company was founded in 1946 in Hong Kong. The company since then has continued to develop Hong Kong’s airline industry and supported Hong Kong’s position as a major transportation center in the region. The airline company was founded by Roy Farrel (American) and Sydney de Kantzow (Australian). Cathay Pacific was founded in Hong Kong on the 24th of September, 1946.


 


Strategic Capabilities


1. Human Resources


            Human resources or human capital is the intangible resources of abilities, effort, and time that workers bring to invest in their work (Davenport 1999). The people at Cathay Pacific are the major contributors of strategic capability to the company. One of the advantages of Cathay Pacific over its competitors is the quality of service that the staff provide to its customers. Service has a big impact on the customers’ perceptions about the company’s product. Because of the importance of its people, Cathay pacific formulated an employee development strategy through proper and effective training. This strategy is expected to strengthen Cathay Pacific’s position in the marketplace.  Employee development can be an essential ingredient of an organization’s competitive advantage. Employee development includes all of the education and training that organizations might invest in their employees such as training employees to perform effectively in their current jobs, orienting employees to the workplace, developing them for advanced positions or programs, and building organizational capability for future success (www.cathaypacific.com). Cathay Pacific promotes a working environment wherein the employees are free to act in both the company’s and passengers’ best interests.


            Virgin Atlantic values the contributions of the company’s human resources to its success. The company has well-designed HRM practices and policies that aim to supply the company with qualified, talented and dedicated workforce. The company makes sure that it only hires people who care about the customers and provide the best service by bringing their individual personalities to work. Virgin Atlantic recruits its staff via newspaper advertisements and the Internet. Training and development is also important to Virgin Atlantic. The management style at Virgin Atlantic is one which facilitate employee empowerment. Employees are actively involved and their ideas on ways of further adding value to the customers are heard. Employees are expected to internalize values and behave accordingly. This internalization of corporate values meant a greatly reduced need for external controls but employees are still held accountable for their performance. Human resource management systems are in place to keep people committed by stock options, bonuses and profit sharing and wherever possible, there is promotion from within.


 


2. Customer Relations


            Cathay Pacific believes that their business is selling experience to the passengers. The emotional bonding with the passengers is the key to building loyalty and one of the major factors that encourage the customers to repurchase the airline products. The biggest difference of Cathay Pacific to its competitors is its people. The employees at Cathay Pacific are the ones who bridge the gap between product development and customer expectation. The passengers in Cathay Pacific always feel welcomed, appreciated and reassured. Passengers that travel with Cathay Pacific know that they are in good hands. Service Straight from the Heart is a programme that aims to develop cultural change within the airline focused on improving customer service. Service is the principal means of differentiating between airlines and is highly influential in customer choice.  Cathay Pacific has expressed within its programme its understanding of the importance of the people within the organization and its recognition of the contribution of those people to its success. Cathay Pacific provides excellent customer service by creating a climate for positive behavior. Cathay Pacific’s corporate culture instills in the employees the understanding of the company’s big picture. The corporate culture that the company has encourages innovation, constant improvement and personal responsibility. The service philosophy of Cathay Pacific – Service Straight from the Heart, encourages the employees to render quality service with human touch. Another way of improving customer service is through continuous improvement. Cathay Pacific always bears a sense of urgency and crises. Present successes are not allowed to create complacency. Cathay pacific absorbs any good ideas from different companies, governments or organizations.


 


            Virgin Atlantic’s strong customer relations is a source of competitive advantage for the company. By building its customer relations, the company was able to increase customer loyalty. Just as many other airlines do, Virgin Atlantic offers a frequent flyer program called ‘Flying Club’. By combining this feature with continuous improvement efforts, such as expanded seat space, Virgin offers incentive to retain its customers. Another method for broadening its target market (and thus expanding market share) is to offer a discount version of the original airline; and so it did. Virgin Atlantic’s discount airline, Virgin Blue, has already established basic routes through the Australian, New Zealand, and Tasmanian areas. As a result, Virgin Blue’s success is reflected in its Australian market share, which has already reached thirty percent as of December 2003. A third means of building customer loyalty—a less conventional method—is through Virgin Atlantic’s customer service simulations. This program has enabled the company to gain distinct competitive advantage by simulating customer service experiences and working to improve the flying process. As a result, the company has “improved customer service for passengers and reduced costs by reorganizing existing, and introducing new, check-in services at


airports around the world”. This technique has led to concrete changes, and Virgin Atlantic has retained both its customers and competitive edge over time (Virgin Atlantic Airlines 2004).


 


 


References


 


Davenport, T. O. (1999). Human Capital: What It Is and Why People Invest It.


            San Francisco: Jossey-Bass.       


 


History. (2006). Cathay Pacific. Retrieved December 17, 2008, from www.cathaypacific.com


 


Press Information Kit (2004). Virgin Atlantic Airways. Retrieved December 17, 2008, from http://www.virgin-atlantic.com/pdf/vaa-press-kit.pdf


 


Stahl, M. J. and Bounds, G. M. (1991). Competing Globally through Customer Value: The Management of Strategic Suprasystems. New York: Quorum Books.


 


 


 


 


 


 


 



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