Virgin Atlantic, Marketing, External Environment, Internal Environment, Porter's Five forces Model, IIFM, Indian institute Of Forest Management, Richard Branson

1. Indian Institute Of Forest Management
CASE STUDY ANAYSIS OF VIRGIN ATLANTIC AIRWAYS
Submitted by
Jasim Alam 1418
Pravel Jain 1426
Vivek Anand 1444

3. VIRGIN ATLANTIC
Introduction
Initiated by Sir Richard Branson, founder of the Virgin group, “Virgin Atlantic took to the air in
1984” (Virgin Atlantic History, 2013) And it reflected all the values promoted by all the products
under the ‘virgin’ umbrella: “value for money, quality, innovation, fun and a sense of competitive
challenge” (Virgin Atlantic, About us, 2013) “On 20 December 1999 Richard Branson signed an
agreement to sell a 49% stake of Virgin Atlantic to Singapore Airlines to form a unique global
partnership.” (Virgin, about us, 2013) However, Branson retained the controlling 51% stake in
the company and focused on developing it into a successful airline.
Currently, Virgin Atlantic operates in the UK out of Heathrow airport: “We've only got 3% of the
slots at Heathrow, but we have 10% of the movements and a 23% or 24% market share on the
North Atlantic."(Kinglsley-Jones, M., 2011) And it has positioned its self as the main competitor
of British Airways.
Figure 1 Competitor’s

4. The success of the airline industry depends on numerous uncontrollable factors influencing the
market place. These range from volatile fuel prices, economic crises, natural catastrophes to an
increase in political as well as safety regulations, just to name a few of the challenges companies
face. In an environment with such intense rivalry, it is crucial to differentiate to survive; a point
which Virgin has continuously excelled at through their marketing communication efforts. Virgin
Atlantic has managed to transform their product into an experience, allowing their brand
personality to thoroughly shine through.
GENERAL ENVIRONMENT
Economic
 The 9/11 attacks left a major impact that the airline industry is yet to recover from
 The prolonged recession, fluctuations in oil prices and an imminent global slowdown
are factors that are affecting the growth.
 Airlines have to cope with declining passengers, high fuel prices, competition from low-cost
airliners, labor demands and soaring operating and maintenance costs
 Deregulation keeps airline fares so low as compared to that of other countries.
 The reason for this is despite the failure of most entrants since deregulation, investors continue
to create new airlines.
 Market implications: lowered airline tickets; discounts for senior citizens; discounts for group
travelers
Political-Legal
 In January 1991, the UK opened Heathrow Airport to Virgin when it abolished the London
Air Traffic Distribution Rules in response to pressure from the industry.
 Highly regulated political environment where passengers are favored over the airlines.
 Passenger safety is paramount.
 Government intervention are necessary to protect the passengers’ interests and airline
operations’ safety measures.
Social factors
 Demand for air travel has increased significantly over the years.

5.  Indicating ravel preferences among the latest generation.
 The passenger profile has changed as well with there being more economically minded
passengers.
 Business class passengers, improved communication facilities have reduced the need to fly
down for meetings.
Technological factors
 Technology is also one of the four pillars under the International Airline Transport
Association’s (or IATA) strategy to address climate change.
 To survive the intense competition companies must adopt the latest technology.
 Use of advanced aircraft technology results in lower fuel consumption this improves efficiency
and the cost of airline operations.
INDUSTRY ENVIRONMENT
Barriers to Entry (Medium to High)
 Initial investment capital is high cannot be afforded by all.
 Existing market players have already stabilized their positions and have also created a brand
identity.
 Fuel is the largest barrier to entry for the new comers.
 According to a 2012 report in the New York Times, fuel costs account for up to 50 percent of
an airline’s expenses.
 Airlines are subject to a significant range of government regulations, and complying with all
of them can be a barrier.
 New pilots tend to prefer a career with an established company rather than a riskier startup.
Bargaining power of the suppliers (High)
 The main supplier for airlines is obviously its aircraft manufacturer.
 In Virgin Atlantic case, the main aircraft manufacturers are Boeing and Airbus.
 Fuel companies are also one of the key suppliers for airlines, since fuel is the basic necessity
for aircraft in order to operate.
 The airport itself supplies the services needed by aircrafts. IT companies such as IBM and
NCR can be classified as suppliers as they supply IT solutions.

6. Bargaining power of the buyers (Medium)
 Virgin Atlantic Airways is known for the quality service render to their passengers.
 The Virgin Atlantic Airways offers the cheapest airfare so that the passengers can afford.
 Passengers were used to purchase their tickets directly from the airlines company.
 At that time, bargaining power of customers was very low
 Now every airline spreads its distribution channel everywhere even overseas to keep up with
the competition this enables the airlines to cover a larger market.
Competition (High)
 American Airlines Group Inc., BRITISH AIRWAYS PLC, AIR FRANCE - KLM
 Reduced government role and protective rules have lead to the increased competition among
airlines.
 Competitors in the industry have same capability in terms of interactivity of their web page.
 Already established brands
 Possess global identity hence large customer based
 Big Players having similar models
Availability of Substitutes (Medium)
 For every product or service a company offers, there is always a potential of a substitute for it.
Virgin Atlantic Airways operates completely in air transportation.
 Air transportation is utilized by people who need to travel faster and time efficiency is crucial
for them.
 If time is not a main consideration, people might choose to travel by sea or land and this saves
them a lot of money.
 The main substitutes for airline industry are trains, buses and ships.

7. SWOT Analysis
Strenghts
Comprehensive Service
Cargo
Strong brand Image
Brand loyalty
Brand awareness
Effective Communication,
campaigns, Innovation
Uniques product(differentiation)
Receive awards consistently
Weakness
Lack of Scale compared to
competitors
Fleet size
Limtited routes
Threats
Price Wars
Economic downturn
Unpredictable fuel prices
Opportunities
Expansion into Asian market
Growth of Air Industry
SWOT

8. Business Strategies
Cost Leadership
 Low cost carriers (LCCs) as well as mid-range airlines are appealing to a broad scope of
consumers.
 As Virgin Atlantic does not fall into the low cost category, but pioneered unique features
to differentiate their services, they have adopted a differentiation strategy.
 LCCs follow a cost leadership strategy, Virgin Atlantic are offering the same value for
product, in this case the flight, at a lower price.
 This tends to attract a larger number of customers and allows them to sell higher volumes
at lower margins.
Differentiation
 The recent changes in passenger needs have influenced the trend and direction of the
aviation market.
 Passengers desire to be presented with the option to choose the components of their
service package individually.
 Virgin Atlantic pioneered with offering flexible, customizable service.
 Providing the passengers with choices makes them feel as though they are able to own
the experience, which increases customer satisfaction, ultimately leading to enhanced
brand loyalty.
 Their upper class passengers are able to access the office area, the in-flight bar and spa
area even personalizing meal times.
 Virgin Atlantic aims at end-to-end service, on and off the plane, allowing passengers to
even book Virgin-sponsored motorcycles or limousines for their airport transfer.

9. Recommendation
 The first proposal involves Virgin Atlantic becoming a public company rather than a
privately owned one. This would be recommendable, as the company needs an injection
of capital to continue delivering value to its customers. With a current fleet only 38 planes
strong the company needs to grow both internally, purchasing more planes and hiring
more personnel, and externally by servicing more routes
 The second proposal suggests that Virgin merges with a South-East Asian airway.
Currently Singapore Airlines owns part of virgin Atlantic, however a full partnership would
allow for the British company to penetrate the profitable Asian market.