Virgin Blues Mission Statement - Case Study Example

Running head: Virgin Blue Inc Name Course name Professors’ name Date Memo To: The CEO From: Date: 05th December, 2010 Re: Innovative strategies and action plan for Virgin Blue This is a strategic analysis covering on Virgin Blue, an Australian based airline investment company. By utilizing strategic tools provided by Michael Porter, the paper first examines forces that are operating in the company. These elements are both intrinsic and extrinsic in nature and have a direct influence on a company’s efficiency. The literature further elaborates on SWOT analysis that matches company’s resources and capabilities to the competitive environment of the airlines. Outcome of this analysis allows for strategy formulation and selection. To increase company’s performance, the following are recommended strategies for Virgin Blue: continuous organizational change that guarantees newer product and services ticketing system that recognises socio-economic status partnership with small businesses Total Quality Management possibility of ‘stand up seats’ specialization energising pressure groups Moreover, businesses are reshaping their customer experience centre with an objective of providing customized services that meets clients. This tendency has played a critical role in raising company’s reputation thus increasing ‘repeat business.’ Research reveals that satisfied customers will always look forward to future business activity with an organization. The action plans for the stated strategies have been discussed in detail. Introduction Virgin Blues is a renowned international company that specializes in airline business and operates worldwide .The Virgin brand was initiated in 1973 by Richard Branson’s Virgin Group. Strategies Highlighted in this project paper will enable Virgin Blue to hold on the airline market and to even further improve its competitiveness. This report has also attached a comprehensive SWOT profile of the Virgin Blues Company focusing on the company's key strengths, faults and possible chances and threats. The five forces framework provided by Porter has been used to perform an industry analysis of Virgin Blue. The main purpose therefore is to formulate strategies that will enable the business to grow in its profitability as well as maintain its loyal customers. This project consequently attempts to examine virgin blue airlines in terms of its past, present and possible future outlook with a special focus on approaches employed in expansion of business as well as sustaining profits. Virgin Blue’s mission statement The company describes itself as the new world carrier with an aim of “keeping the air fair.” The company focus is to offer, "A range of innovative products, services and features that better meets the needs of all guests." It aims at delivering quality service through empowering its employees and "improving customer’s experience through innovation" (virgin group 2008). Analysis of Virgin Blue Initially, Virgin Blue airline was launched as a sustainable low fare airline in Australia and has subsequently grown to be recognized as an innovator and leader in aviation industry. Virgin began its business in 2000 with two aircrafts plying the same route under supervision of 200 members who had a vision of changing air travel in Australia and beyond. Apart from low airfare, the airline introduced excellent services to its customers and focused on becoming the very best in the business world. From the year 2000, virgin airline has steadily expanded as a start up business to achieve the level of a major air travel service provider. At the same time, the investment is always recording on-time performance, high rates of returns to investment in addition to profitability. In December 2003, Blue was mentioned on Stock Exchange and now is owned by majority shareholder Virgin Group, Staff and other category of shareholders. Through its evolving business strategy, Blue is gaining position in the corporate market but has retained role of providing traditional leisure services. Some of the added services provided to travellers include: special corporate plus fares, the lounge, blue holiday, extensive choice of code-share and interline partnership that give customers access to worldwide airline network. At the moment, virgin is enjoying local market coverage of more than 31% and a modernised fleet. Furthermore it operates more than 2100 flights in a week that extends to 24 Australian cities and 8 external destinations. Proposed new strategies and Action Plan After a thorough investigation, it is appropriate that Virgin Blue cultivate a culture of continuous change or improvement away from traditional ways of handling customers to the present innovative customized experiences. To achieve this, employees must be trained on the customer care discipline. Technology ought to be utilized intensively when serving customers since it bridges the gab between the company and clients. Secondly, the company can move a notch higher and develop a ticketing system that recognizes socio-economic background of clients. This is achieved by considering average incomes of clients. It is upon the company to introduce tickets of varied prices irrespective of the season. Customers always respond positively when prices are stable contrary to fluctuating price levels. Virgin Blue had positioned itself as the third reliable airline. Its competitors Qantas and Ansett were Full Service Airlines (FSA) and when Ansett collapsed in 2001 Virgin Blue quickly filled in the void. Bamber (2006) identifies that Virgin Blue aggressive expansion based on lower costs was 30-40 percent less than Qantas. It is important to further develop this strategy through acquisition of small airlines so as to increase its asset base and further meet differentiated needs of customers. This will also enable the company increase its coverage to remote part of Africa where resources are yet to be exploited productively. The airline has widened its scope to international arena and does not compete only on the domestic front with smaller aircraft. On a higher scale, partnership with small businesses leads to growth and mutual interdependence. Such small companies can provide supplementary services to Virgin Blue at a lower cost. The company should reconsider phasing out old planes and replace them with new and sophisticated planes. It is important to examine feasibility of ‘‘stand up seats” that would capture customers travelling short distances and have less to spend. Upon its inception, Virgin Blue Atlantic made use of second hand planes. The company has utilized the seat capacity potential to its advantage. Although the airline operated the lowest number of flights per week as of September 2008, it did not have the lowest weekly seat capacity when compared to competitors. The proposed strategy will function to improve carrying capacity and revenue from Virgin’s flights. Another strategy employed by virgin blue that needs improvement is operating longer international routes where the use of smaller aircraft would be uneconomical. In adjusting to this concern therefore larger aircraft that have a high carrying capacity have been used. Apart from leisure travel, virgin Blue can establish business travel markets and very low cost carriers that would compete with JetStar. In terms of human resources, Total Quality Management should be made part of performance measurement criteria. This is a continuous process where quality of output is made a daily experience. At the moment, recruitment process employed at virgin blue is a rigorous one which ensures that only candidates possessing the desired attributes and skills are recruited. The corporation appreciates people who have an internal desire to make a constructive contribution in other people's lives. Highfield (2005) identifies safety, timely performance, and great service as the most essential values which virgin blue employees strive to attain. In addition, the employees are trained in a wide range of skills. This strategy should be changed into specialization that will enable employees maximize their talents by bring innovation to the company. Research indicates that specialization leads to invention and innovation. Pressure groups are essential components of employee administration thus should be made more vibrant. Limited number of unions joined by Virgin employees has in the past caused friction among some organizations, for instance between the Transport Workers Union (TWU) and Australian Services Organization which is not recognized by virgin blue. Conclusion Both SWOT and five Forces analysis carried out in the paper gives a whole description of Virgin Blue. In order for the company to thrive, it is imperative to consider ways to outsmart competitors. To live up to the mission of providing innovative products and services to its clientele, virgin must lay emphasis on nature of customer experiences, empowerment of employees through vibrant unions, efficient recruitment process and advanced level of technological appreciation. These are the key drivers in a competitive airline industry. Attachment 1: Porter’s five forces analysis Industrial rivalry Virgin Blue is competing with Qantas and Tiger Airways at home and is further planning to fly between Australia and the US which will automatically give Qantas and Air NZ a run for their money with low fares. Due to attractiveness of the routes, Virgins competition using low fare strategy will reduce profits realized by Air NZ. JetConnect and JetStar that are supported by Qantas offer low cost fares thus compete on Trans-Tasan routes and smaller nodes in South Island. Potential Threat of New Entrants As competition increased in the Pacific airline industry, its capacity has subsequently expanded by about 30%. Nevertheless, this growth is hampered by recent economic crisis that had the effect of reducing the amount of personal disposable income. Air NZ, jetcommect, JetStar, Emirates, Virgin Blue, Pacific Blue, and Qantas, are the existing airlines both locally and internationally. Potential Threats of Substitutes The nature of aviation and topology in Australia disregards the possibility of a new airplane substitute entering the market. However, fast rate of technological advancement, fuel fluctuation, global warming may act as a trigger for people to develop new means of travelling. The government of Australia is at the moment planning to divert resources into coastal shipping that may have an effect on airline freight industry. Such a move would motivate people to consider transporting their valuables by water due to its inherent economical features. In recognition of this fact, Europe is quickly embracing coastal shipment. Bargaining Power of Suppliers Airline investment requires specialized products and services which are obtained from specific standard sources. These sources are more often guided by their own regulatory requirement. Such inputs are costly to the airline and are susceptible to unpredictable price changes. Virgin blue should therefore make sure that its suppliers do not monopolize provision of inputs. This is realized though expanding alternative inputs. Bargaining Power of Buyers Economy class travellers favour reduced charges hence more than willing to pay as low as $39 on a regular basis. Air NZ and Qantas may benefit if commuters and high income earners reconsider utilizing low cost airlines. Virgin blue may well consider re-classing their carriers in response to the new world outlook of keeping air travel affordable. Virgin Blue Brand name is a proof of trust in delivering quality products at comparably low cost. Attachment 2: SWOT Analysis of Virgin Blue Strengths Coupled up with global financial slump, people are resorting to cheaper and affordable means of travel. Reduced price of a ticket therefore grants the company a competitive edge in aviation industry. Virgin’s strong brand name was evident in the inter-brand’s brands survey of the year 2001 that not only placed Virgin top 12 global brands but enlisted it as one of the leading brand in Asia Pacific. The brand propagates value for money and high standards in its areas of business. To further demonstrate strengths of Virgin Blue is low average fleet age which means that they offer their customers with newer products with the most recent technology. Weaknesses Air NZ and Qantas offer an inclusive service to their customers. On the contrary, Virgin Blue charge their clients extra fee for food and water. The airline further does not offer more frequent schedules as compared to Air NZ and Qantas. An attempt to increase capacity and frequency of travel would have an immediate impact of generating more revenue in a short run period. An observation where virgin blue is outsourcing most of its support service and heavy maintenance indicates inability to use information technology in its activities. Easy Jet on the other hand prides itself on developing information communication technology services such that more people are not employed and clients are served faster. Opportunities There are several opportunities that are at the exposure of Virgin Blue. Through globalization, Virgin can utilize this opportunity to establish new destinations especially in African countries. Intensive appreciation of technology serves the purpose of meeting customer’s needs at an appropriate time. Virgin airline can also enter into partnership with other airlines so as to increase span of choice for the customer. Threats Threats in this case emanates from other low cost service providers like JetStar and Qantas. Emergence of economic carrier ship is a treat to company’s freight sector since people are now resorting to cheaper and affordable means of ferrying goods and services. Read More