Virgin Atlantic Airways Inc.
VIRGIN ATLANTIC GLOBALIZATION
Virgin operates in the third era of Globalization (2000 onwards) where everything is connected through the Web. This means that Virgin use extensively Internet and other technological platforms to conduct its business. The Globalization of Virgin Atlantic contributed to capture the international market and to the improvement of the organization, but still there are some challenges experienced that influence the organization policies and the decision making, they include: Co-operation with other airlines (i.e. Singapore Airlines)
Consideration of different cultures of people
Environmental factors (measures to reduce drastically pollution) Research of outer-space tourism
Consideration of trade agreement and tariffs
Increased airline destinations to other countries especially developing countries Virgin bargaining power to negotiate better deals with manufactures Investments in latest technologies
Offer of better working conditions for employees
The benefits Virgin gains from Globalization are that the cooperation with other airlines has proved to be useful to the organization in improving its global network of international destinations and has increased its profit margin. Moreover, thanks to the research of outer-space tourism more and more consumers are curious about the outer-space, and hence the company has taken the initiative to be the first airline that is offering this service. Furthermore, the consideration of trade agreement and
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Virgin Atlantic Strategy is to “think global, act local” to better understand customers’ needs. For this reason, the company has decided to make the airfare flexible to suit different cultures and languages of targeted consumers: for example, hostesses wear the burka in Etihad Airways. Virgin Atlantic Services are standardized across different countries, varying in the flight segment that depends on the company you are flying with (i.e. Virgin Atlantic and her sisters, Virgin Australia in Oceania and Virgin America in USA). To better satisfy local customers’ needs, the company has undertaken some partnerships, as they did with Air New Zeland that offer unprecedented choice in flights across the Tasman, Singapore Airlines, Etihad Airways, Delta Airlines, SkyWest Airlines, Hawaiian Airlines, etc.
In particular, Singapore Airlines has emerged as the single biggest investor in Virgin Australia, snapping up $122 million (19,9%) in shares in the airline of Richard Branson’s Virgin Group. Air New Zealand has about 19% of the remaining shares, Etihad 8%, and Virgin Group 13%. Moreover, Virgin Atlantic Airways operates the vast majority of its weekly seat capacity on routes to North America. Its network spans 33 non-stop passenger destinations of which 11 are in North America, eight in Central America and the Caribbean, four in Africa, one in the Middle East and eight in the Asia-Pacific region. The Global/Local Responsiveness graph for Virgin
According to the Global/Local Responsiveness graph Virgin Atlantic Airlines is on a medium-high position, as regionalization is difficult to obtain for such a global service like the one of airlines.
As you can see from the Graph, a competitor such as Ryanair offers more standardized services compared to Virgin, in fact Ryanair’s fleet consists of only one kind of Airbus (i.e. Boeing): every time you fly with Ryanair you will receive the same food, feel the same comforts and feelings, and it will be only for a short haul.
On the other hand, Virgin is able to offer global services on a local-scale, making it possible to define this company Glocal.
4 P’s ANALYSIS FOR VIRGIN
Virgin Atlantic has sought to offer a fun and innovative product with high
quality services and convenient locations for the customer.
Virgin Atlantic offers flights worldwide in three distinct classes: Upper Class, Premium Economy, and Economy. In details:
Complimentary limo-service on both sides of the Atlantic
Drive through check-in from the limo
In-flight beauty therapy – massages and manicures
Freedom menu – restaurant style cuisine at any time
Onboard stand-up bar
Personal 10.4 inch video screen
Ergonomic seats with over 6 feet of sleeping space
Sleep service – pajamas, full size pillows, feather duvets and fleece blankets A dedicate sleeping area
Fast track-priority service through immigration
Dedicated check-in desk
Priority baggage handling
Flexible ticket – no penalty for last-minute changes
Comfortable wider seats with up to 6 inches of extra-legroom Seatback video-screen
Fruit throughout flight and ice-cream during movies
Fast track-priority service through immigration
Seatback video-screen with up to 43 channels of movies, music, and video games Choice of three entrees, including a vegetarian option
Complimentary beverages, including cocktails
Children’s services including K-iD backpacks, TV channels and special meals Ice-cream during movies
The price for the Upper Class ticket is around $9,000 dollars. Premium Economy tickets are listed around $3,000 dollars and Economy tickets are currently priced at $500 dollars to London.
Virgin Airlines tickets can be bought principally on the websites, travel-agencies, sales-offices and call centers.
Promotion is the publicized announcement designed to attract customers. Virgin Atlantic is continuously promoting through various media. It has pioneered Internet marketing in the airline industry. Their website allows more efficient communication between Virgin Atlantic and customers.
Concrete examples of promotions are the Velocity Gold Card and the Flying Club Loyalty Program, a frequent flyer program that encourages loyalty in its customers. In addition to offering miles that can be exchanged for free flights and other rewards, Flying Club members are offered other support services and clubhouse access.
Virgin Atlantic also is continuously involved in sponsorship programs. It has their own communication program aimed at staff within the company. With regards to promoting the company, Virgin Atlantic has an events team that organizes press launches and other activities.
4 C’s ANALYSIS FOR VIRGIN
Virgin is able to satisfy the needs of each kind of customer, in particular high-income people, by offering 3 different flight-classes (Upper Class, Premium Economy, and Economy). Virgin Airlines’ surveys monitor the punctuality of flight departures, the length of check-in-lines, and the quality of in-flight entertainment and service. The results of these surveys provide the airline with valuable information on which to base improvements in its services. In this way Virgin can provide what customers want day-by-day.
Virgin offer high ticket price for good-quality services and low searching costs, while opportunity costs depend on customers’ preferences.
Virgin Airlines uses a wide range of marketing communication techniques. Advertising activity includes direct mail, TV, press, magazines, outdoor posters and taxi sides, all featuring their distinctive logo, like the one of the Flying Lady. Advertising is used to encourage people to fly with Virgin Airlines, to raise awareness of new products’ developments and to inform customers about new routes. Among these advertising practices, Virgin provides direct responses, sales promotions and public relations all combined to grant clarity, consistency and maximum communication impart.
The website offers full electronic booking capacity, allowing passengers to reserve and pay tickets online, plus full destination information and a comprehensive guide to the benefits of flying with Virgin Atlantic. Moreover, Flying Club members are able to use this website to check their mileage balance, rewards and earning opportunities, while new members can subscribe on-line.
Virgin segments the market according to geographic and demographic variables, i.e. customers’ destinations and customers’ income/status, gender and age by providing three different travel classes.
Upper Class passengers are predominately traveling on business and are 35 to 45 years old male, earning £50K plus per annum; passengers in Premium Economy are split between traveling for business or leisure, male aged 41; and Economy passengers are a much broader group, traveling mainly for leisure, spread across most socio-economic groups and age ranges.
Virgin Airlines have targeted upper class customers who are primarily business passengers traveling on transatlantic routes, by realizing the opportunity to gain a considerable market-share through effective marketing of their quality, fun, innovative, honest, and caring airline.
The most suitable targeting strategy is, therefore, the Differentiated Marketing Strategy, whose main advantage is that you can satisfy all needs of your targeted consumers, and main disadvantages are that there are too much high costs and you fail to consider other potential customers by differentiating too much.
Virgin attracts customers by being fun and innovative and offering high luxury services, i.e. spacious setting arrangements, limo service to and from the airport on both sides of the Atlantic, in-flight entertainment system, restaurant-style dining and full-service bar, high level of customer service, business facilities, Internet capabilities and distinctive upper class services like exclusive use of clubhouses, Virgin touch beauty salon-massages, facials, and barber services at Heathrow and Gatwick.
One of the main competitors of Virgin Atlantic on principal international
routes is British Airways (as can be seen from the table below), that is perceived by customers for its reliability, its reputation, and the efficiency of its staff.
For these reasons, Virgin Atlantic has located itself as direct competitor to British Airways on all routes by offering an innovative service to position itself as the most original brand in the airlines’ market. Firstly, it was extremely aggressive in obtaining slots at Heathrow International Airport. Secondly, it attacked the proposed British Airways and American Airlines partnership stating that it was unhealthy for competition. Finally, Virgin Atlantic has strived to compete with British Airways on all routes into and out of London.
(About the campaign of “No way BA/AA” that fights against the merge of British Airways and American Airlines to prevent BA monopoly)
Therefore, in such a competitive environment, Virgin needs to differentiate to perform in the best way: Virgin Airlines can differentiate its product by taking customers’ expectations one step further through communication with the customer. An easy example can be seen in providing in-flight ice-cream, something other airlines do not offer. 11. MISSION STATEMENT
Virgin focuses on giving customers new experiences based on Luxury, Comfort, and Innovation.
Indeed, it is clear that the mission statement is strongly related with the targeting and positioning strategies of its business plan.
12. SWOT ANALYSIS
Brand Awareness: Virgin Brand is recognized by 98% of British Public; Good customer service in each separate class;
Innovative technology personalization: including in-flight music, ice-cream,
games, movies, beauty and massage therapy (i.e. in India), and lounges offering quality food and comfort for gold club holders; Quality trained employees;
Richard Branson’s innovative entrepreneurial management;
Competitive pricing for business class that offers more services; Partnership with Singapore Airlines: this partnership is beneficial because their routes are non-overlapping and the partnership allows the transfer of core competencies; Positive publicity, in regards to winning every quality award known to man.
Flight delays: need to improve flight efficiency;
Travel routes limited, considering just Virgin Airlines;
Cut routes to Chicago, Toronto, and Cape in relation to the September 11 tragedy; Virgin’s great reliance on transatlantic traffic: more vulnerability to the drop in demand for travel to and from the U.S.; No clear strategic direction: Richard Branson is a one man manager being the owner and director of multiple companies, and this could put Virgin at stake; High Costs to offer premium services: two five star chefs, lounge, and limo-service; OPPORTUNITIES
Being innovative, fun, maintaining values, caring, and produce quality can enhance the company ‘s image; Keep developing new advances in technology like Galileo and in-flight Internet connection; Opening to new destinations/ new partnerships;
Acquiring new planes;
Find alternative plan fuels to reduce carbon emissions;
Virgin Galactic, flying into outer space from 2004: in September 2011, Virgin Galactic has started accepting reservations aboard their sub-orbital spacecraft.
(Flying Lady Logo for Virgin Galactic)
A global economic recession;
Terrorism: September 11th will and has affected the entire airline industry, order cancellations, risk aversion for flying customers; Strong competition with British and United States routes;
Fluctuating fuel prices (15% of total airline expense).
13. INTERESTING MISTAKE
Virgin Blue, a Virgin’s partner, sent to all customers’ database an e-mail congratulating on achieving the Velocity Gold frequent flyer membership.
With this card customers have access to lounge areas, can use the priority check-in and get up to 32 Kg of baggage.
After just one hour, they sent another e-mail saying:
Of course, customers felt very disappointed and avoided flying with Virgin Blue in other occasions.
In order to fix this huge mistake, Virgin should have sent at least a discount on the next flight ticket or let customers take advantage of the priority check-in, instead of doing nothing. In this way the company had lost, with its reliability, too many customers.
In such a challenging market as the airlines’ one, it is hard to locate the brand in the mind of price-sensitive customers in terms of product attributes and benefits that the brand does or does not offer with respect to products of other airlines.
For this reason, Virgin should take advantage of its original brand to maintain its profit sustainability and:
Create an image of itself as a more reliable and balanced company by going public and encouraging investments by ensuring that the company won’t take impulsive decisions or uncalculated risks, and instituting a board of directors who will take decisions together so that the company’s future won’t rely only on one person; Concentrate more on the products offered by the airline: all the promotional matter is too Richard Branson centric, in fact, most people got to know about the airline through news associated with him, and, although this is a cost-effective means, it could threaten the longevity of the product as the dependence for brand awareness on one person is too high; Use innovative means to keep attracting new people and sustain their current passengers: the novelty of frills such as massages, on board bar, etc. can lose its magic; also, this can be copied by competitors very easily (Virgin need to keep coming up with services that have a first runner advantage, such as book your ticket to space born in 2008); Reduce waste generated by minimizing the costs of fuel, maintenance, acquisition and salaries; Try to lower tickets to aggressively capture the market that faces an increase of competitors, as it’s almost becoming a do or die industry, by, for example, offering affordable discounts especially for consumers who travelling as a family; Expand its airline network to other countries (i.e. Ghana, Egypt, etc.); Focus at expanding its operations in India, where today the consumer has evolved and is seeking higher quality of services at a value for money price, and double its daily services to Delhi and Mumbai, besides extending its services to at least 3-4 more destinations; Reduce emission of air pollution by reducing cargo weight, aircraft weight in order to sustain environmental regulations.
By following these recommendations, Virgin should be able to augment and maintain its competitive advantage over other airlines.
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