Business Strategy

Individual Assignment

BUSINESS STRATERGY

Student Name Nilesh Dilushan

Student ID CT/BM/60/41
Submitted to Ms. Kasuni
Submission Date- 6th March, 2016
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INTERNATIONAL COLLEGE OF BUSINESS AND TECHNOLOGY

BTEC HND DIPLOMA IN BUSINESS (MANAGEMENT & HUMAN RESOURCES)

ASSIGNMENT COVER SHEET 2014/2015
UNIT TITLE & CODE

LEVEL

CREDITS

15

Unit 7: Business Strategy

STUDENT ID
STUDENT NAME

Inoka Gunarathne

IV by

Rajitha Ranaweera

Word Count

4000 words

ASSESSOR

BS_BM 62
ASSESSMENT

1 of 1
ASSIGNMENT

ASSIGNMENT
SUBMISSION DATE

ISSUE DATE
ASSIGNMENT
DISCUSSION DATE(s)
FINAL GRADE

ASSIGNMENT
RESUBMISSION DATE
ORIGINAL SUBMISSION

RESUBMISSION

AUTHENCITY STATEMENT
I certify that the attached material is my original work. No other persons work or ideas have
been used without acknowledgement. Except where I have clearly stated that I have used some
of this material elsewhere, I have not presented it for examination / assessment in any other
course or unit at this or any other institution

SIGNATURE: .

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DATE:..

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ILO

Description

1.1

Explain strategic context and terminology - mission,

vision, objectives, goals and core competencies

1.2

Review the issues involved in strategic planning

1.3

Explain different planning techniques

2.1

2.2

Individual Assignment
Comment

Produce an organizational audit for a given

organization
Carry out an environmental audit for a given
organization

2.3

Explain the significance of stakeholder analysis

3.1

Analyse possible alternative strategies relating to

growth, limited growth or retrenchment

3.2

Select appropriate future strategy for a given

organization

4.1

Compare the roles and responsibility for strategy

implementation

4.2

Evaluate the resources requirements to implement a

new strategy for a given organization

4.3

Discuss targets and timescales for achievement in a

given organization to monitor a given strategy
Identify and apply strategies to find appropriate

M1

solutions. The student has applied correct strategic

tools and techniques in answering the questions
Select/design and apply appropriate methods/

M2

techniques. The relevant tools has been correctly

used/explained

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M3

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Present and communicate appropriate findings under

the correct formatting guidelines
Use critical reflection to evaluate own work and

D1

justify valid conclusions. Effective insights were

drawn for the discussion
Take responsibility for managing and organizing

D2

activities and the coverage of the content with a

substantial effort

D3

Demonstrate convergent / lateral and creative

thinking.

Assessors Name

Inoka Gunarathne

Signature

Date

Student Feedback Response

I received the feedback and have a thorough understanding on it.

Signature of the Student: .

Date: .

UNIT AIMS & OBJECTIVES

On successful completion of this unit a learner will:
1. Understand the process of strategic planning
2. Be able to formulate a new strategy
3. Understand approaches to strategy evaluation and selection
4. Understand how to implement a chosen strategy

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ASSIGNMENT BRIEF

Task 01_Report
Pick an organization of your choice cover the following areas. Produce the answer in a report
with 4000 words. Relevant theoretical context, appropriate depth, valid references are mandatory
in this task the student must use at least five valid references to produce a meaningful answer.

Explain strategic context and terminology in relation to the organization highlighting the
mission, vision, objectives, goals and core competencies (LO 1.1)

Review the issues involved in planning strategic direction for the organization under the
current business conditions (LO 1.2)

Explain the different planning techniques (LO 1.3)

Produce an organizational audit (LO 2.1)

Carryout an environmental audit (LO2.2)

Explain the significance of stakeholder analysis (LO 2.3)

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Acknowledgement
First and foremost I thank almighty god for his abundance of graces and assistance to complete
the report in good manner. And most importantly my parents who shouldered me in all my
hardships undertaken throughout the preparation of the report. Secondly, my sincere thanks and
gratitude goes towards the lectures to their efforts made on lecturing the Business Strategy
module. Moreover, I thank my friends for their contributions and support towards completing
this project
I also thank the ICBT staff and the library staff for their dedicated services towards students in
referring materials and books on Business Strategy.
I am also thankful to my module supervisor Ms. Kasuni and Ms. Inoka Gunaratne whom without
the help and guidance this report would not been completed.

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Executive Summary
The purpose of this report was to understand the strategic contents and theories in relation to
Virgin Atlantic. At first, the report provides standard definitions of strategic terminologies
according to book of exploring corporate strategy (6th Edition) written by Johnson and Scholes.
Further, it analyses the strategic context and terminologies in relation to Virgin Atlantic
including the mission, vision, goals, objectives and core competencies of the organization.
Secondly, report identifies the general problems and challenges that can be commonly arises
when formulating and implementing strategies. It further carries to the common problems faced
by Virgin Atlantic in the process of strategic formulation and implementation and general
techniques used to mitigate issues.
There are two different planning techniques namely Value chain and BCG matrix that have been
explained in depth, identifying the theoretical aspects in general. In addition, report takes a clear
organizational audit that analyses the internal capabilities of Virgin Atlantic which is helpful to
identify the strengths, weakness, threats and opportunities of the organization. It also identifies
the current position in the market and the areas need to be developed.
Organizational audit is followed by an environmental audit that covers a range of factors that had
influence and likely to influence the operations of Virgin Atlantic through an in depth PEST
analysis. It also identifies possible forces and their pressure that could affect Virgin Atlantic
through porters five forces analysis.
Finally, the report consist information about the internal and external stakeholders involved in
Virgin Atlantic and their significance through stakeholder mapping. In addition, information on
the ways that Virgin Atlantic uses to engage these stakeholders in organizations activities.

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Table of contents
Introduction..10
1.Strategic contexts and terminology....11
2.Review of the issues involved in strategic planning of Virgin Atlantic14
3.Different planning techniques16
3.1 Value Chain 16
3.2 Boston Consulting Group (BCG) Matrix...19
4. Organizational audit for Virgin Atlantic ..21
4.1 Boston Consulting Group (BCG) Matrix of Virgin Atlantic ....21
4.2 Value chain of Virgin Atlantic ..........22
4.3 Ansoffs Growth Matrix of Virgin Atlantic...24
4.4 SWOT analysis of Virgin Atlantic.25
4.4.1 Strengths of Virgin Atlantic26
4.4.2 Weakness of Virgin Atlantic...26
4.4.3 Opportunities for Virgin Atlantic27
4.4.4 Threats for Virgin Atlantic..27
5. Environmental audit for Virgin Atlantic28
5.1 PESTEL analysis28
5.2 Porters Five Forces analysis31
6. Significance of Stakeholder Analysis ..34
6.1 Stakeholder mapping of Virgin Atlantic.35
6.1.1 Stakeholders with High power and High interest.35
6.1.2 Stakeholders with High in power and Low in interest.36
6.1.3 Stakeholders with Low in power and High in interest.36
6.1.4 Stakeholders with Low in power and low in interest37
6.2 Approaches to involve stakeholders in decision making.. 38
7. Conclusion.39
8. References..40

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List of diagrams and tables

Exhibit 1.1

The vocabulary of strategy11

Exhibit 1.2

The vocabulary of strategy of Virgin Atlantic..13

Exhibit 3.1

The Value chain within an organization...16

Exhibit 3.2

Boston Consulting Group (BCG) Matrix..19

Exhibit 4.1

BCG matrix of Virgin Atlantic..21

Exhibit 4.3

Ansoffs Growth Matrix of Virgin Atlantic..23

Exhibit 6.1

Stakeholders of Virgin Atlantic.34

Exhibit 6.2

Stakeholder mapping of Virgin Atlantic ..35

Exhibit 6.3

Approaches to engage stakeholders 38

Table 1

Primary activities.17

Table 2

Support activities.18

Table 3

Primary activities of Virgin Atlantic23

Table 4

Support activities of Virgin Atlantic....23

Table 5

Porters Five Forces of Virgin Atlantic33

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Introduction
Virgin Atlantic is a British airline that is Strategic Business Unit of Virgin Group which is
founded by Sir. Richard Brandson in 1984. It is the 2nd largest airline in Great Britain. Virgin
Atlantic is primarily based on Londons Heathrow and Gatwick airports and Manchester, United
Kingdom. Virgin Atlantic flies over 200 destinations through 30 routes around the world.

Virgin Atlantic is 51% owned by the Virgin Group and 49% owned by Singapore Airlines on the
agreement signed in 20 December 1999 to sell 49% share to Singapore Airlines. It is also
partnered with Delta Airline, Air China and New Zealand Airlines to access more routes and
destinations.

Virgin Atlantic offers three classes of travel - Upper class, Premium Economy and Economy all
with award-winning inflight entertainment. Virgin Atlantic is popular for its core competencies
and unique resources. Virgin Atlantic is the first to introduce personally screened seat and seats
with extra comforts.

Virgin Atlantic also caters its customer by offering value added services such as booking taxies,
booking hotels, in-flight massages and beauty therapies and cargo services. It is also famous for
its Flying club which offers free miles of travel and special offerings to its flying club members.

Lufthansa, Cathay Pacific, American Airlines and British Airways are the direct competitors of
Virgin Atlantic, where British Airways is considered as the closest competitor.

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Business Strategy
Strategy is the direction and scope of an organization over the long term, which achieves
advantage in a changing environment through its configuration of resources and competencies
with the aim of fulfilling stakeholder expectations

Johnson et al. (2005)

1. Strategic contexts and terminology

There are varieties of terms used in relation to strategy. Vision, mission, goals, objectives and
core competence of an organization are considered as important and influencing factors in the
process of planning the business strategy.
Exhibit 1.1 illustrates some of the terms used in business strategy according to the book of
Exploring Corporate Strategy, sixth edition, written by Gerry Johnson and Kevan Scholes.

Term

Definition

Mission

Overriding purpose of an organization, in line

with the values or expectations of
stakeholders

Vision or Strategic intent

Desired future state or aspiration of an

organisation.

Goal

General statement of aim or purpose

Objectives are statements of specific

outcomes that are to be achieved.
Quantification (if possible) or more precise
statement of the goal.

Objective

Unique Resources and Core Competences

Resources, processes or skills which provide

competitive advantage

Exhibit 1.1
The vocabulary of strategy
Source (Johnsons and Scholes, 2002)
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In accordance to the Virgin Atlantic corporate website available at www.virginatlantic.com and

Virgin Atlantic annual report 2014, Exhibit 1.2 analyses and evaluates the terms used in strategy
in relation to the Virgin Atlantic.

Virgin Atlantic declared its mission statement simple as,

Mission
To grow profitable airlines, where people love to fly, and
where people love to work.
(Virgin Atlantic, 2016)
More precisely, at first, their mission statement aims to increase the
profitability, secondly aims at the customers (people) and finally
towards the employees which is the overriding purpose of the
Virgin Atlantic.

Vision

"Our vision is to fulfill the potential demand of the customer

and make their journey comfortable and also set the standard
for others in the airlines industry.
(Virgin Atlantic, 2016)
Referring to the vision statement, Setting the standard to the
competitors in the industry through achieving customer satisfaction
is what Virgin Atlantic wants to achieve (desired state) in the
future.

Goals

The aim of Virgin Atlantic,

To be the airline most loved by our customers, we will achieve
this by being uniquely Virgin Atlantic
( Virgin Atlantic, 2014)

Which is a long-term goal in line with the mission

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Aircraft & fuel -

Objective

Reduce CO2 emissions by 30% per Revenue Tonne Kilometre

between 2007 and 2020
Noise Reduce noise output per aircraft movement by at least 6dB (75%
reduction in noise energy) on average between 2012 and 2020
Ground Transport Reduce the average CO2 emissions of our UK vehicles by 35%
between 2009 and 2020
Water Reduce UK water use by 5% between 2012 and 2020
(Sustainability Report 2015)

Followings are the number of Shot-Term objectives set by Virgin

Atlantic. Further, the objectives can be related into a SMART
framework.

It is Specific on environmental factors and Measurable in terms of

percentage and values. Further, Achievable since the Virgin
Atlantic has seen positive results on its progress. Moreover, it is
Realistic since the success and availability of resources of Virgin
Group. And also it is Time bounded.

Core Competencies

Three different class services

(Upper, Premium and Economy class), space saving and reclining
seats, Virgin fuel, red-hot destination packages, in-flight
entertainment ( personal video screens, movies, games and child
featuring activities ), concept of flying club (Silver and Gold)

Following are the core competencies, which creates the

competitive advantage, where Virgin Atlantic gains a competitive
edge in the airlines business market.

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Exhibit 1.2
The vocabulary of strategy of Virgin Atlantic

2. Review of the issues involved in strategic planning of Virgin Atlantic

There are some issues involved in strategic planning and those issues must be studied properly
and analyzed in terms of feasibility and importance. Identified issues have to be tactfully
resolved by the strategic planners of the organization. Following are some of the issues that can
be identified in planning strategic direction of the organization.
1. Strategic planning is costly and time consuming Planning strategic direction of the
organization is complicated and involves high levels of risk. Formulation of Strategic plans
requires detailed information. Primary and secondary researches conducted in order gather
adequate information to formulate strategies are costly and time consuming. Decisions made
upon inadequate and unreliable source of information may result serious failures in formulated
strategic plans. Further, it consumes considerable time since the decision making process is
long. Hence strategic planning costs both in terms of time and money. In the case of Virgin
Atlantic, since Sir. Richard Branson is a one man being the proprietor and decision maker of
multiple companies (Virgin Group), therefore the decision making is time consuming since the
process is too long.
2. Financial issues and concerns The market Virgin Atlantic operates exposed to certain
financial risks such as foreign currency risk, interest rate risk, fuel price risk and liquidity risk.
Financial issues mentioned impacts on the long term strategic decisions taken by organization.
The market which, Virgin Atlantic operates is broad, therefore the risk on foreign currency is
high with frequent currency fluctuation which minimizes the profit margins and account serious
losses where Virgin Atlantic struggles to implement strategic decisions. Further, hikes in
interest rates increases the amount of payments to creditors and unpredictable jet fuel price is
also one major contributor as it increases the operating cost of Virgin Atlantic. Such financial
issues is one major problem in strategic planning as it impacts the profitability and affects the
budget allocation for future strategic directions, in fact it has led to serious loss of 300m
approximately throughout 5 years to the end of 2013, which resulted staff redundancy into 500
managerial and support job cuts in 2014 (BBC, 2015)
3. Communication and Leadership issues Lack of communication in between senior
management and employees is an internal factor within the organization which is an issue in the
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execution of strategies. It is important to understand, although the strategic plan is formulated

by the senior management it has to be executed by employees. Good strategic plans may result
in failure for the reason of communication gaps. Involving employees in the planning of
strategy and direction for the organization provides different insights in formulation and
execution of strategies. In the context of Virgin Atlantic, Sir. Richard Branson practices a
friendly leadership style where all the employees are treated like assets.
4. Environmental issues Business environment has a nature of transforming constantly.
Strategic planners should pay attention towards the changes in the business environment. In
general, strategic decisions are long term decisions, hence the environmental condition that
exists on the formulation of a strategy may not exist on its implementation. Therefore Strategic
plans have to be flexible (environmental fit) enough according to the changes in the
environment, where it may require shifts in the direction of the organization. Therefore it is
important to monitor the changes and incorporate them into strategic planning process. Business
environment issues can be classified as Internal and External environment.
a) Internal environmental issues Internal environment also affects the strategic
planning. However, the organization has certain level of control over it and the
affects by internal changes can be mitigated. For instance high level of labour
turnover, resignation of key employees, changes in the management.
b) External environmental issues - Organization must be more alert on external
environmental factors that can affect their planning since the organization has no
control over external environment factors as it exists outside the organization. For
instance - new competitor enters or existing competitor leaves the market,
population shifts, and economic changes. In context of Virgin Atlantic, natural
calamities such as

windstorms and

tornados

and political

instability

(environmental laws, taxes and restriction) which are external environment causes
serious issues to the strategic planning of Virgin Atlantic.

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3. Different planning techniques

There are number of planning techniques and tools that can be used in strategic planning process.
Following task goes into detail about some of the selected planning techniques used in strategic
planning in an organization.
1. Value Chain
2. Boston Consulting Group (BCG) Matrix

3.1 Value Chain

The Value chain describes the activities within and around an organization which together create
a product or service.

Johnson and Scholes (2002)

Value chain is useful management tool that breaks an organization's activities down into
strategically relevant pieces and identifies specific activities in which a firm gains a competitive
advantage. It can be defined as below stated.

Exhibit 3.1
The Value chain within an organization
Source: Johnson and Scholes (2002)

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Primary activities
As per Johnson and Scholes (2002) connotation, Primary activities are directly concerned with
the creation or delivery of a product or service and can be grouped into five main areas: inbound
logistics, operations, outbound logistics, marketing and sales and service.

These are the activities concerned with receiving, storing and

Inbound Logistics

distributing the inputs to the product or service. They include materials

handling, stock control, transport, etc.
Operations transform these various inputs into the final product or

Operations

service: machining, packaging, assembly, testing, etc.

Collect, store and distribute the product to customers. For tangible

Outbound Logistics

products this would be warehousing, materials handling, transport etc.

In the case of services, they may be more concerned with arrangements
for bringing customers to the service if it is a fixed location. ( e.g.
sports events)
Provide the means whereby consumers/users are made aware of the

Marketing
and Sales

product or service and are able to purchase it. This would include sales
administration, advertising, selling and so on. In public services,
communication networks which help users access a particular service
are often important.
Service includes all those activities which enhance or maintain the

Service

value of a product or service, such as installation, repair, training and

spares.
Source: (Johnson and Scholes, 2002)
Table 1
Primary activities

Support activities
According to Johnson and Scholes (2002) each of these groups of primary activities is linked to
support activities. Support activities help to improve the effectiveness or efficiency of primary
activities. They can be divided into four areas: Firm infrastructure, Human resources
management, Technology Development, Procurement.

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As can be seen in the exhibit 3.1, the dotted lines shows that each support or secondary activity
plays a role in primary activity, which reinforces the statement of Johnson and Scholes stated
above.
Primary activities directly add value to the end product or service. The support activities
indirectly add value by providing the support necessary for the effective execution of the primary
activities.

Firm infrastructure

(Grant,

Hackney

and

Edgar

2000)

The systems of planning, finance, quality control, information

management, etc. are crucially important to an organizations
performance in its primary activities. Infrastructure also consists of
the structures and routines of the organization which sustain its
culture.

Human resources
management

This is a particularly important area which transcends all primary

activities. It is concerned with those activities involved in
recruiting, managing, training, developing and rewarding people
within the organization.

Technology Development

All value activities have a technology, even if it is just knowhow. The key technologies may be concerned directly with the
product (e.g. R&D, product design) or with processes (e.g. process
development) or with a particular resource (e.g. raw materials
improvement). This area is fundamental to the innovative capacity
of the organization.

Procurement

This refers to the process for acquiring the various resources inputs
to the primary activities. As such, it occurs in many parts of the
organization.
Source: (Johnson and Scholes, 2002)
Table 2
Support activities

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3.2 Boston Consulting Group (BCG) Matrix

Johnson and Scholes (2002) says, the most common and long standing ways of conceiving of
the balance of a portfolio of businesses is in terms of the relationship between market share and
market growth identified by the Boston Consulting Group (BCG) in which BCG matrix is
formed. BCG is a widely used strategic model which analyses the product portfolio that guide
the organization in resource allocation.
Source: www.CIMAgloble.com

Source Johnson and Scholes (2002)

Exhibit 3.2
Boston Consulting Group (BCG) Matrix

Mostly companies with diversified product lines make use of the BCG models to evaluate the
organisations resources for products. In general, organizations use BCG is used in brand
marketing, product, portfolio and strategic management to develop their business and products
according to amount of strength or weakness it has in the market growth and market share
The BCG matrix splits an organizations product line into 4 portfolios - which are Stars, Cash
cows, Dogs and Question marks.
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Characteristics of product portfolios

Stars (high growth, high market share)
According to Johnson and Scholes (2002) star is a business unit which has a high market share in
a growing market.

Use huge amounts of cash

Generates large amount of revenue

Leaders in the business and market

Cash Cows (low growth, high market share)

As Johnson and Scholes (2002) say cash cow is a business unit with a high market share in a
mature market.

High profits and cash generation

Low growth makes investments in product should be low for higher profit

Dogs (low growth, low market share)

Dogs are business units with a low share in static or declining markets. (Johnson and Scholes
2002)

Its always better to avoid products considered as dogs in the company

It cost high to turn around and better to liquidate

Question Marks (high growth, low market share)

According to Johnson and Scholes (2002) question mark (or problem child) is a business unit in
a growing market, but without a high market share.

High Demands and low returns

Generate great absorption of internal resource in times.

Investments ought to be at minimal level in order to generate positive profits.

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4. Organizational audit for Virgin Atlantic

There are number of planning techniques to identify the current position of the organization.
Following are some of the techniques discussed in relation with Virgin Atlantic.
1. Boston (BCG) matrix
2. Value chain
3. Ansoffs growth matrix
4. SWOT analysis

4.1 Boston Consulting Group (BCG) Matrix of Virgin Atlantic

Boston Consulting Group (BCG) matrix is not an ideal tool to analyses the internal capabilities
of Virgin Atlantic to decide on resource allocation. But still it is quite important to understand
the position of its product in the market.

Exhibit 4.1
BCG matrix of Virgin Atlantic

Exhibit 4.1 identifies the BCG matrix of Virgin Atlantic, plotted according to the passenger class
offered in Virgin Atlantic.
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With regard to Virgin Atlantic passenger class services, it is unable to identify a class service
that could fit into Stars, where none of the class services in Virgin Atlantic has a high market
share in a growing market.
Cash Cow Cash cow have high share of a low growth market that make high revenue
generation which is applicable to Upper Class service offered by Virgin Atlantic. Upper class
targets only high net worth wealthy customers and business passengers, which generates higher
revenues in comparison to premium and economy class. Therefore, VA should focus on adding
more value to wealthy and business passengers
Question mark In Virgin Atlantic, Premium Economy is a question mark which has the
potentials of high revenue generation but that requires resources to build market share. Since
Premium economy targets at budget travellers who wants extra comfort, Virgin Atlantic has to
acquire additional modernized spacious aircrafts to offer competitive premium class service to
more destinations.
Dogs Virgin Atlantic's economy class can be seen as a dog since it has a low market share
since competitors offer lower airfares to economy class with more destinations. It is not
appropriate to allocate additional resources to economy class since it is in a low growth market
and not performing well comparatively to its competitors in the airlines industry.

4.2 Value chain of Virgin Atlantic

Table 3 and 4 analyses the Value chain framework of virgin Atlantic identifying in which the
organization create value and gains competitive advantage.
Primary activities
Inbound logistics

This includes selection of route, flight scheduling, acquisition of aircrafts,

storing and managing fuel, refreshment, food and beverages for
passengers which are the primary inputs for services offered by Virgin
Atlantic.

Operations

Aircraft operation (flying), ticket counter operations and on board services

makes Virgin Atlantic flies over 200 destinations in 30 routes.

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Outbound

Book a taxi, book hotel and upper-class passenger gets transport service to

logistics

travel to airport, check in procedures are completed before the arrival and
special security services in the lobby for upper class Virgin Atlantic
customers which is a competitive advantage.

Marketing and

Virgin Atlantic used wide range of marketing techniques. Advertising

Sales

activities includes magazines, television, outdoor posters, and stickers on

taxis. It also encourages loyalty through flying club membership. Finally,
offers and incentives offered for travel agents.

Services

Lost baggage services, complaint follow-ups and most comfortable flat

bed and seat offered for upper class passengers is also distinct services
offered for virgin Atlantic customers.
Table 3 Primary activities of Virgin Atlantic

Support activities
Firms

Virgin Atlantic heavily focuses on its technological solutions and its

infrastructure

unique resources. It is backed by Virgin group which has strong financial

strengths, supports the corporate strategies of Virgin Atlantic. Virgin
Atlantic practices a friendly open working environment.

Human Resource Employees are recruited primarily through its website and newspaper
management

advertisements. Offers world class training to its staff including sign

language skill to facilitate to disable passengers and work related
trainings. Further, partnered travel agents receive commissions and
incentive rewards based on their performances.

Technology

Virgin Atlantic are the first to introduce personal screens on seats and

development

their in-flight entertainment system, travel seats and extra comfort beds
are some examples for technology development. Current Usage of Bio
fuel is a technological solution to reduce carbon emission. (Virgin
Atlantic 2016)

Procurement

Virgin Atlantic interacts with organizations that provide various services

at airports, including refueling, baggage handling, aircraft maintenance,
transport options and cleaner services and security which reduces the cost
and achieves economies of scale to the organization.
Table 4 Support activities of Virgin Atlantic

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4.3 Ansoffs Growth Matrix of Virgin Atlantic

Exhibit 4.3
Ansoffs Growth Matrix of Virgin Atlantic

4.3.1 Market Penetration

In terms of market penetration, Virgin Atlantic gains market share primarily through its unique
resources and core competencies. Virgins brand name is also a major key to its high market
penetration. At the same time, Virgin Atlantic retains its loyal customers through loyalty
programs such as Flying club memberships by offering the same products to the same
customers. Further, it also attracts customers of competitors through its unique core
competencies. Specifically, Upper class is where VA gains high market penetration. Virgin
Atlantic organizes marketing campaigns, advertisement and seasonal offers and packages in
which they increase the penetration of existing market with the existing products.

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4.3.2 Product Development

Virgin Atlantics product development is exceptional that involves a range of new innovations
and developments. Virgin Atlantic is the first airlines to introduce personal screens and their inflight entertainment is an award winning development.

VA caters developed services that

includes in-flight massage, beauty therapies and on board bar to its Upper class passengers and to
existing flying club members. Booking a taxi or hotel and cargo services are also possible for
Virgin Atlantics passengers, which are value added service to their product and service offered.
4.3.3 Market Development
In terms of market development, Virgin Atlantic sold 49% of its shares to Singapore Airlines.
Virgin Atlantic benefited by the merge that increased the market access through offering existing
service to new markets meanwhile that increased the revenue generation and profitability.
Further, its partnerships with Delta Airlines, Air China and Jet Airways created access to more
destinations.
4.3.4 Diversification
Virgin Atlantic formed Virgin Australia in Australia and Virgin Nigeria which are SBUs of
Virgin Atlantic in the same airline industry that is considered as the Related Diversification.
In addition, Virgin Atlantic was able to manage refueling the aircrafts through Virgin Fuels
which is Backward Integration and Cargo Services and Booking taxies and hotels is an
example for its Forward Integration.

4.4 SWOT analysis of Virgin Atlantic

SWOT analysis summarizes the key issues from the business environment and the strategic
capability of an organization that are most likely to impact on strategy development.
(Johnson and Scholes 2002)
Johnson et. al, (2014) have mentioned SWOT provides a general summary of the Strengths
and Weaknesses explored in an analysis of strategic capabilities and the Opportunities and
Threats explored in an analysis of the environment.
The strengths, weaknesses, opportunities and threats identified in Virgin Atlantic using the
analytical tool are explained below.
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4.4.1 Strengths of Virgin Atlantic

1. Strong brand name - Virgin Atlantic is a Sub Business Unit of world renowned and most
successful Virgin Group of companies which is the primary strength of Virgin Atlantic.
2. Sir. Richard Bransons reputation and his innovative entrepreneurial management.
3. In-flight innovation - Introduction of innovative technology and they are the first to introduce
in-flight entertainment such as personally screened movies and music, games and activities for
which VA has received many awards.
4. Introduction of the concept of Flying Club It includes special lounges in certain airports and
offers quality food and service during the flight and offers complementary miles and free
flights in a points based system which increases the brand loyalty.
5. Virgin fuel Having its own filling station is a greatest strength which helps to meet
unexpected demands and avoid uncertain fluctuation in the fuel prices.
6. Its partnership with Singapore Airlines which owns 49% of shares of Virgin Atlantic
reinforces the fleet of aircrafts and expanded the market access which made it competitive in
the airlines industry.
7. Launch of Upper class suit and services - Upper class features a luxurious leather arm chair
that folds over into a bed, a freedom menu service also features an on board bar, in-flight
massage, arrival facilities (dedicated check-in, shower rooms, valet service) are distinct
strength, which penetrates high net worth customers to Virgin Atlantic.
4.4.2 Weaknesses of Virgin Atlantic
1. Limited travel routes and destination Virgin Atlantic flies only 200 destinations around the
world, which is comparatively low to its competitor British Airways. (Virgin Atlantic, 2016)
2. Relatively small aircraft fleet of 39 as of December 2014 (Virgin Atlantic, 2014) comparing
to it rivalry British Airways which has 265 aircrafts (planespotters, 2016), 226 more than
Virgin Atlantic.
3. Small market share in airlines business market.
4. Financial weakness Virgin Atlantic bared total losses of more than 300m in the five years to the end
of 2013.(Financial Times, 2015)
5. Richard Branson is a one man manager being the proprietor and administrator of various
decision maker of multiple company which makes the decision making slow.

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6. Ineffective alliances Virgin is partnered with number of airlines namely, Delta airlines,
Singapore airlines which split the profits and involvement of other airlines in the decision
making of Virgin Atlantics.
7. Ordinary Operational failures such as Flight delays
4.4.3 Opportunities to Virgin Atlantic
1. Alliance and mergers brings benefits such as more market access, access to new technology,
cost sharing, pooling of resources and risk diversification.
2. The increasing number of travellers in UK is also an opportunity to VA. UK residents made
60.1 million visits abroad in 2014.UK residents made 4.0% more visits abroad and spent 1.0
billion(3.0%)

more

during

these

visits

in

2014

than

2013.

(Office for National Statistics, 2014)

3. Asian market expansion creates opportunity to partner with local airlines and initiate flights
from Europe to main Asian destination with their aircraft fleet. Further, Asian market has
bigger population comparatively to Europe.
4. Opportunities to generate additional routes throughout the globe and acquire modernized
aircrafts.
5. More than 280 airports are available throughout Europe where destinations can be expanded.
6. Virgin Group has decided to fly into outer space in the name of Virgin Galactic, which is a
part of Virgin Atlantic, in the near future is an opportunity to generate high income.
4.4.4 Threats to Virgin Atlantic
1. Rapid expansion of virgin brand image may result brand dilution, which also affects Virgin
Atlantic.
2. Budget airlines Economical air fares by competitors may adversely affect budget passenger
penetration to Virgin Atlantic.
3. Natural calamities such as volcanic eruption, uncertain weather conditions, storm and tornado
may result inconvenience and harm to aircrafts.
4. Terrorism in certain countries is a threat where it limits the routes Virgin Atlantic flies and
creates fear among passengers.
5. Emergences of new airlines, and their competitive pricing strategies.
6. Competitors purchasing new aircrafts.
7. Fluctuation in fuel prices accounts an increase in the total airline expense.

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8. Improved telecommunication such as video conferences and sophisticated technological

advancement reduces the purpose of business travelling.

5. Environmental audit for Virgin Atlantic

An environmental audit provides awareness about the environment that the organization
operates. Virgin Atlantic operates globally where the environment of Virgin Atlantic is a global
environment. Proper understanding of the external environment is important to Virgin Atlantic to
achieve sustainable competitive advantage over other airlines in the market. Following tools are
used to make an environmental audit.
1. PESTEL analysis
2. Porters Five Forces analysis
5.1 PESTEL Analysis
1. The Government intervention in terms of income tax which
Political Environment

captured approximately 2.7m for tax where the total profit

before tax (gross profit) is 17.6m and profit after tax(net
profit) is 14.9m , as accounted in 2014 annual report of Virgin
Atlantic.
(Virgin Atlantic 2014)
2. UK Governments aviation regulation on Airline licensing
through the UK Civil Aviation Authority and changes in
their policies impacts the operation of Virgin Atlantic.

3. VAT imposed by government effects Virgin Atlantic

adversely by an increase in the air fares, where people may
look for cheaper options.

4. Airport fee and charges collected in purpose of airport

improvement

and

landing

fee

which

increases

the

administrative expenses also reduces the net profit of Virgin

Atlantic.

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Economic Environment

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1. Global economic crisis of 2008, heavily hit on the United

Kingdom-based businesses where the scheduled airline
businesses have also got affected adversely.

2. Economic instability of the country weakens Sterling

Pounds against Euro which affects currency exchange rates
which affect the turnover and profit of Virgin Atlantic since
it flies to various economies.

3. Pattern of inflation rate in United Kingdom. Drop in Gross

Domestic Product of United Kingdom. For 2015 as a whole,
GDP growth was 2.2%, down from 2.9% in 2014.
Source - (The Guardian 2016)

Socio-Cultural Environment

1. Virgin Atlantic is Sub Business Unit of Virgin Group which is

a highly recognized brand that has already created customer
awareness, customer loyalty and built reputation and trust
of society.
2. Lifestyle and growing trend in tourism penetrates
frequent customers into Virgin Atlantic, where it facilitates
customers needs according to their preferences in terms of
language usage, food with in-flight entertainment.
3. It caters its customers according to their social classes
through upper class for high net worth customers, premium
and economic class for budgeted passengers.

4. It also creates ample of job opportunities frequently which

give growth to standard of living

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Technological Environment

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1. Technologically advanced corporate website of Virgin

Atlantic caters many facilities such as pre and post flight
assistance which saves time and cost of labour. (Check-in
online, booking Taxies and Hotels)
2. Usage of biofuel to the transportation promotes the airlines
environmental friendly and reduces carbon emission.

3. Passengers are facilitated with modern aircrafts such as

Airbuses and Boeing. In depth, Virgin Atlantic has a fleet of
39 modern air busses and Boeings as of December, 2014.
Source - (Virgin Atlantic 2014)

4. Virgin Atlantic uses the integration of electronic flight bag

(EFB) that displays a variety of aviation data and perform
basic calculations on fuel calculation and performances.
Source (Flight global 2006)
5. Virgin

Atlantics

mobile

application

which

can

be

downloaded in both Android and IOS features managing

booking, reservation of seats, checking fight status and
provides the latest updates about the Virgin Atlantic.

6. Constantly changing technological advancements and the

increased use of the internet and mobile technologies. For
instance, GPS tracking systems.

1. New environmental policies and growing concerns on noise

Ecological Environment

pollution control, energy consumption control, recycling,

reduction of carbon emission.

2. Customers today are more conscious about environmental

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affects and prefer eco-friendly products and services.

1. Tight rules and regulations on environment concerns is high in

Legal Environment

airline industry.
2. Employee laws involved on recruiting and terminations
3. Laws on passenger safety

5.2 Porters Five Forces

Johnson and Scholes (2002) have mentioned the five forces framework helps identify the sources
of competition in an industry or sector.
As it is mentioned by Clegg et. al (2011) porters five forces framework can help organizations
to ascertain the attractiveness or profit potential of their industry by analyzing the relative impact
of each of the five forces on their industry structure.
Table 5 analyses the competitive nature and the attractiveness of airline industry in order to
assess the position of Virgin Atlantic in the market.
Strength

Force/Threat

High

Competitive Rivalry

Airline industry is larger in size and profitable. Hence, multiple

establishments are attracted to invest into the airline market which
increases the competition.

British Airways, American Airlines, Lufthansa, Cathay Pacific are

some of the close competitors to Virgin Atlantic in the airlines
industry.

Direct competitive rivalry is British Airways. BA is comparatively

strong in consideration of the fleet of aircraft, number of destination
and profitability. Further, it offers a competitive Upper class service
package.

Not every airline manages to make profits therefore lack of

profitability leads to consolidation of competitors (alliances and
mergers) that increases rivalry.

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High

Individual Assignment

Supplier Power

Two major aircraft manufacturers (Boeing and Airbus) with high

amount of competitiveness and control over the market. Therefore
they have high bargaining power.

Virgin Atlantic has control over the supplier of fuel to the aircrafts
since its supplied by Strategic Business Unit of Virgin group. (Virgin
Fuels)

Generally priority of landing slots is given to historic rights of

existing users by the airports.

IT companies such as IBM and NCR can be classified as suppliers as

they provide IT solutions to Virgin Atlantic.

Suppliers also include companies who make spare parts to the

aircrafts and switching cost from one supplier to another is high.

Medium

Buyer Power
Airline industry is a buyers market where customers have the ultimate power
to select the airline in their preferences.

Although customers are high in numbers, number of airline that flies

to same destination with similar packages is lower. Therefore buyers
have medium bargaining power.

Increased usage of internet has improved customer awareness where

air fares can be easily compared.

Buyers may switch to lower cost airlines due to economic conditions.

However, customers of Virgin Atlantic are generally brand loyal. Therefore

possibilities of customer boycotts are low.
Low

Threat of New Entrants

A major barrier towards new entry is it requires enormous amount of

capital to enter the sector, which is too competitive.

Failures of certain airlines firms are likely to discourage new

entrants. For example consecutive loses bared by Virgin Atlantic
would conveyed a threatening picture for new entrants.

Legislations and government restrains on airline industry are

formidable that limits the new entrants coming into market.

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new entrants.

Requirement of advance technologies and customer loyalty to existing

brands.

Low

Threat of Substitutes

There are only limited transport alternation such as land and sea
transport which is not speed, convenience and flexible as air travel.

Trend of business travellers switch into other options like

Teleconferencing (Skype), virtual meetings that reduces the necessity
of business travelling.

Leisure traveling with cheaper options like budget cruises lessens the
dependency on air travel.

Substitutes (trains, busses and ships) have lower quality and lower
performance.
Table 5
Porters Five Forces of Virgin Atlantic

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6. Significance of stakeholder analysis

Stakeholders are important to any organisation. Stakeholders can be defined as individuals or
groups who depend on the organization to fulfill their own goal and on whom, in turn, the
organization depends

(Johnson and Scholes, 2002)

A clear understanding of stakeholders is necessary in the case of formulating and implementing

new strategies in an organisation. In order to identify and understand on an organizations
stakeholders, a stakeholder analysis can be done.
According to Johnsons et al. (2014) stakeholder mapping identifies stakeholder expectation and
power and helps in understanding political priorities.
Stakeholders of Virgin Atlantic include a range of individuals and groups. Exhibit 6.1 classifies
these stakeholders and groups them as internal and external stakeholders.

Exhibit 6.1
Stakeholders of Virgin Atlantic

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6.1 Stakeholder mapping of Virgin Atlantic

Exhibit 6.2 is the model of stakeholder mapping which analyses the stakeholders of Virgin
Atlantic and their significance in relation to the organization.

Exhibit 6.2
Stakeholder mapping of Virgin Atlantic

6.1.1 Stakeholders with High power and High interest - Manage them closely
The owner Richard Brandson (Virgin Group) has the ultimate authority to make any
decision regarding Virgin Atlantic operations since he holds 51% shares over VA. In
addition, he is the founder and the first person to get affected by any failures of Virgin
Atlantic such as bearing losses.
Shareholders and investor groups are the people who have invested capital and having a
high power and high interest in the financial success of the company. In the case of
Virgin Atlantic, Singapore Airlines is the important shareholder with 49% shares of
Virgin Atlantic. Further, corporate companies partnered with Virgin Atlantic and general
public who hold VA shares should also closely managed since they have invested and
expect return on investment. They play significant role by injecting adequate funds,
without which Virgin Atlantic cannot operate.
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Creditors which are financial institution should also manage closely since VA holds a
responsibility to repay the money obtain in the agreed period. In the case of failing,
creditors can decide to stop funding and not to provide financial assistance for future
operations. Meanwhile, they also have the authority to sue the company for unethical
financial practices.
Therefore it is important to have strong relationship toward them and their involvement in
making big decisions and formulating strategies is essential.
6.1.2 Stakeholders with High in power and Low in interest Keep Satisfied
Customers are king since they have an array of choices to choose a preferred airline in the
airline industry. Meanwhile passengers are the source of profit to Virgin Atlantic.
Therefore they are considered as stakeholders with high power whom should be kept
satisfied. Although not every customer is brand loyal, hence they show lesser interest in
the activities of Virgin Atlantic, specifically in long-term strategic decisions. However
customers are significant where there is no income generated in their absence.
Government and Regulators (UK Government and Civil Aviation Authority, UK) are
immensely high in power through implementing tight legislations that ought to be strictly
followed by Virgin Atlantic. These regulations have a high impact on Virgin Atlantics
operation. But they are not specifically tailored to Virgin Atlantic which expose they
have a lessen interest on the specific performance of VA. These people should be kept
satisfied since they have the authority to cease the operations of the airline through
restrictions, licensing and imposing taxes or to abolish the existence.
Although, they have low interest its important to keep them satisfied to ensure the smooth
running of the organization.
6.1.3 Stakeholders with Low in power and High in interest Keep informed
Employees Employees in Virgin Atlantic are treated like assets and important to the
organization since they have the power of influencing customer satisfaction through their
service rendered, they have no control over management decisions taken by Virgin
Atlantic. For instance, recent staff redundancy up to 500 in Virgin Atlantic (The
Guardian, 2015) reinforces that employees have no power over the decision made.
However they are immensely interested in VAs activities since it directly affects their

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career and personal life. Further, they should be kept informed on organizations activities
since they are the people through whom the organization implements strategies.
Suppliers In general, Suppliers have no power over organizations decision since Virgin
Atlantic has alternatives. For instance, Virgin Fuels mitigates the risk of jet fuel
demands in the market.
Competitors are highly interested in Virgin Atlantics activities to prevent their customers
switching to VA and to increase the market share through their competitive advantages.
They are low in power since they cannot influence the strategic decisions their rival
implement.
However it is ethical to keep them informed about the Virgin Atlantics activities although they
dont have power over strategic decisions made by the organization.
6.1.4 Stakeholders with Low in power and low in interest Monitor with minimal effort
Community groups are general public who get affected by the negative actions of
business such as air and sound pollution. They show lower interest and much lover power
on Virgins Atlantics strategic decisions. However, Virgin Atlantic should monitor these
parties with certain level of effort by being Environmental Friendly. For instance Virgin
Atlantic uses Bio Fuel which lowers the carbon footprint and maintains satisfactory
relationship since they could stand against the organization by conducting strikes,
protests which creates negative indication to the organization.
Debtors have no power over organization rather have a liability to repay debts where they
show not much interest about the decisions made by Virgin Atlantic. But they should be
monitored with minimum effort to receive the debts granted on maturity.

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6.2 Approaches to involve stakeholders in decision making

It is important to involve each stakeholder to the decision making as they are part of Virgin
Atlantics operation. Exhibit 6.3 depicts the methodologies used to involve stakeholder in
decision making process.

Stakeholder Group

Stakeholder Engagement
Engaging staff through direct staff communications
(email and intercom), annual staff engagement survey,

Employees

quarterly employee road shows, internal team meetings

and internal training and development.

Customers

Customers are engaged through customer relations team,

websites, social media, market based research and focus
groups, in-flight magazines and customer contact centres.

Shareholders and Investor Groups

They are engaged through investor briefings, annual

general meetings, annual reports, sustainability reporting

Governments and Regulators

Engagement

with

governments

and

regulators

is

coordinated through the group executive, government

relations.
Community Groups

Annual report, our websites, the mass media, social media

and CSR projects engages community.

Suppliers

Suppliers are involved through annual supplier conference

contract

execution,

tenders

and

ongoing

contract

management.
Source (Virgin Australia 2016)
Exhibit 6.3
Approaches to engage stakeholders

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7. Conclusion
The report analyses the vision, mission, goals, objectives and core competencies in relation with
Virgin Atlantic. Virgin Atlantic has simply and clearly developed strategic terminologies. It is
noteworthy, Virgin Atlantic highly focus on developing competitive advantage through its
unique core competency strategies for people.
Planning the long term direction of the organization which known as Strategic Planning is
important to every organization despite the scale of its operation. In the case of Virgin Atlantic,
the establishment faces number of problems on formulating and implementing strategies. High
cost and time consuming, financial issues, communication and leadership issues and
environmental issues are some of the problems identified and explained in the report. Financial
losses were one main problem that Virgin Atlantic had faced for several consecutive years. It is
mandatory to Virgin Atlantic to increase the profit margin by reducing overhead costs incurred.
Identification of issues, initiating alternative methods and in depth planning with the
involvement of expertise and key stakeholders assists to overcome such strategic issues.
It is important to analyse the external environment of the organization prior formulating the
strategic intents. Porters five forces and PEST analysis which has been discussed in the report
helps to identify the feasibility and suitability based on which the strategic plans have to be
formulated.
Further, strategic planning techniques that includes Value chain, BCG matrix, Ansoffs growth
matrix and SWOT analysis which is known as organizational audit analyses the internal
capabilities of Virgin Atlantic. It is important plan the internal capabilities to decide on resource
allocation and improve the strategic plans and decisions based on organizational audit.
Finally, stakeholder analysis is conducted in relation to Virgin Atlantic which exposes the
significance and engagement of stakeholders. It is vital to Virgin Atlantic to identify the power
and interest of the stakeholders and decide on the approaches to satisfy them and to analyse the
extent of their engagement in organizational strategic decisions.

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8. References
Books
Johnson, G, Scholes, K, Whittington, R, 2005, Exploring Corporate Strategy, 7th Edition, Person
Education Limited, Edinburgh Gate.
Johnson, G, & Scholes, K, 2002, Exploring Corporate Strategy, 6th Edition, Person Education
Limited, Edinburgh Gate.
Johnson, G, Whittington, R, Scholes, K, Angwin, D, Regner, P, 2014, Exploring Strategy, 10th
Edition, Pearson Education Limited, Edinburgh Gate
Clegg, S, Carter, C, Kornberger, M, Schweitzer, J, 2011, Strategy Theory & Practice, New York
Lynch, R, 2003 Corporate Strategy, 3rd edition, Pearson Education Limited.

E Book
Grant, K, Hackney, R, Edgar, D, 2010, Strategic Information Systems Management, Available
at: https://books.google.lk/books/about/Strategic_Information_Systems_Management.html?id=XAc6gUfj8oC&redir_esc=y

Websites
Virgin Atlantic Annual Report-2014, Virgin Atlantic, Accessed: 20th February 2016, Available
at: http://www.virginatlantic.com/content/dam/VAA/Documents/Pressoffice/VAL_FY14_Annual_Report.pdf
Virgin Atlantic sustainability Report-2015, Virgin Atlantic, Accessed: 25th February 2016,
Available at: http://www.virgin
atlantic.com/content/dam/VAA/Documents/sustainabilitypdf/Virgin_Atlantic_Sustainability_Re
port_2015_Full.pdf
Virgin Atlantic, About-Us, Accessed: 20th February 2016, Available at: http://www.virginatlantic.com/eu/en/footer/about-us.html
Virgin Australia, Stakeholder engagement, Accessed: 20th February 2016, Available at:
http://www.virginaustralia.com/au/en/about-us/sustainability/stakeholder-engagement/

Online Articles
GDP growth UK, The Guardian, Accessed: 28th February 2016, Source:
http://www.theguardian.com/business/2016/jan/28/uk-gdp-growth-rises-05-as-annual-rate-slowsto-three-year-low

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Virgins Technology, Flight Global, Accessed: 15th February 2016, Source:

https://www.flightglobal.com/news/articles/efb-is-first-step-in-virgins-technology-revolution205888
Travel-trends-2014, Office for National Statistics, Accessed: 10th February 2016, Source:
http://www.ons.gov.uk/peoplepopulationandcommunity/leisureandtourism/articles/traveltrends/201505-20

Losses bared by Virgin Atlantic, Financial Times, Accessed: 12th February 2016, Source:
http://www.ft.com/cms/s/0/aab18446-c681-11e4-a13d-00144feab7de.html#axzz420SEEqpw

Virgin Atlantic airline to cut 500 jobs, BBC, June 2015, Accessed: 12th February 2016,
Available at: http://www.bbc.com/news/business-33335434

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