Strategic analysis between Virgin Atlantic and British Airways

下面为大家整理一篇优秀的essay代写范文 -- Strategic analysis between Virgin Atlantic and British Airways，文章讲述英国是世界上最大的航空市场之一，历史悠久且市场成熟。英国航空和维珍航空是英国的两家大型航空公司。两家航空公司都有自己的经营策略，以实现更好的发展。但是，它们在全球航空业中也面临挑战。

 

Strategic analysis between Virgin Atlantic and British Airways

The United Kingdom is one of the biggest aviation markets in the world with a long history and the mature market. British Airways and Virgin Atlantic Airways are two giant airlines in the United Kingdom. Both airlines have their own operating strategies for better development. However, they also face challenges in the global aviation industry.

This essay is divided into six parts. The first part briefly introduces the two giant airlines. The second part analyzes the strategy of British Airways and its potential challenges. The third part analyzes the strategy of Virgin Atlantic Airways and its potential challenges. The fourth part makes a comparison between the two airlines in the dimensions of environment and brand theories. The fifth part discusses the competition between the two airlines. The final part is a conclusion of the whole essay.

1. Introduction of British Airways and Virgin Atlantic Airways

British Airways is the largest British airline. It is headquartered in London Heathrow Airport and defines London Heathrow Airport as a hub base. The history of British Airways can be dated back to 1924. It is the oldest airline in the United Kingdom. British Airways is one of the world's largest international air transportation companies and one of the world's seven major cargo airlines. British Airways always sticks to the excellent tradition of providing high quality services to passengers from various countries in the world. (Wikipedia, 2015)

Virgin Atlantic Airways is a British airline established in 1984, providing intercontinental air services. Virgin Atlantic Airways has Britain's second largest international airline. It is also headquartered in London Heathrow airport. Virgin Atlantic Airways is famous for its consistent high quality service and innovative ideas, which pay attention to enterprise development and sustainable innovation dynamics. (Wikipedia, 2015)

2. Strategy analysis of British Airways

The strategy of British Airways can be divided into five perspectives.

Firstly, British Airways has launched the framework of e-commerce. The supply chain is greatly strengthened by the addition of electronic purchasing. In addition to the aviation industry, the core competitiveness of BA is also used in the field of network risk investment.

Secondly, the Company provides an upgraded customer experience. They guarantee the exceed punctuality and baggage targets across the network, achieving record customer satisfaction scores. (British Airways, 2014)

Thirdly, the Company strengthens the competitive cost base. It continues to reduce the cost of Heathrow operations. A significant management voluntary severance program has reduced the number of the management. The Company also wants to use the fuel efficient aircraft. (British Airways, 2014)

Fourthly, the Company has formulated a plan for growth like continuing to meet the needs of its customers and launching new routes.

Fifthly, the Company takes related social responsibilities in reduction of carbon emissions, recycling waste and minimizing air and noise pollutions. (British Airways, 2014)

Challenges for British Airways

The challengers for British Airways can be divided into two dimensions: new competitors and the changing needs from customers.

On the one hand, the Company has to face new competitors. In 1992, the European Union enacted Single European Act and many of the original national trade barriers were removed. At the same time, successive relaxation of regulation also makes any EU airlines can fly freely in the EU. This regulation of relaxation has led to the emergence of a lot of new low-cost airlines.

In order to tackle the challenge, British Airways hasn’t carried out low cost strategy. However, the Company focuses improving the quality of services. The Company has formulated clear strategy in five aspects: firstly, be the airline of choice for long haul premium customers; secondly, deliver an outstanding service for customers at every touch point; thirdly, grow the presence in key global cities; fourthly, building on a leading position in London; fifthly, meet the customers’ needs and improve margins through new revenue streams. (British Airways, 2014) Through these measures, it is hoped that the Company can go through the difficulties.

On the other hand, the Company has to tackle the changing of customers’ needs. As the market has become a fully competitive market, each industry has a lot of competitors. Increasingly high degree of homogeneity of the product or service leads to a lower customer loyalty. Due to the competition of services and prices, the loss of customers is becoming more and more serious for British Airways.

In order to deal with this challenge, the Company has taken three measures. Firstly, the Company focuses on those customers who can bring profits to the company. The Company is willing to give up passengers who are very sensitive to the price of vacation tourism. Secondly, the Company has a clear understanding of the profitability of each route and gives up those who do not make money. Thirdly, the Company aims to win more high-end customers by increasing the number of small passenger flights to and from the business centers.

3. Challenges and Strategy analysis of Virgin Atlantic Airways

The challenges for Virgin Atlantic Airways can be illustrated in two perspectives. One is competition from the pioneering giant airlines and the other is the huge operating cost for an airline company. In order to tackle the two challenges, the Company has formulated related strategies.

The biggest challenge is the competition from the pioneering giant airlines like British Airways. British Airways is the biggest airline in UK and it is difficult to compete with it directly. Therefore, the Company carries out differentiation strategy to tackle the challenges. The differentiation strategy can be divided into three aspects.

Firstly, the Company focuses on the difference of service quality, providing customized products and services. The airline has canceled first class cabin and opened business class, economy class with different levels. Its business class can be comparable with the first-class cabin of British Airways. In addition, its economy class has higher quality and lower price than other airlines’ economy class.

Secondly, the Company focuses on service innovation and differentiation. The Company has provided many new modes of entertainment on the aircraft. In addition to some basic services, the airline also provides additional value-added services by additional charges like massage, manicure and member clubs. On the aircraft, the Company has set up areas for games and a bar.

Thirdly, the Company is good at marketing differentiation, especially using the method of event marketing. Richard Branson, the Company’s CEO, is a dramatic leader and he has made several big events like driving a tank on the royal road, controlling a hot air balloon across the Atlantic and sending aircraft emergency shuttles to Iraq for British hostages during the Gulf War. Richard Branson is very good at using his own image. He has turned up in a lot of brand promotion activities. He always gives surprise to the public. The different ways of marketing of fun, innovation, rebellious corporate image have left a deep impression in people’s mind.

Another challenge is the huge operating cost for an airline company, which results in the high cost for passengers. Meanwhile, the British government has started to levy green taxes on all aircrafts’ arrival and departure. According to the policy, green taxes are undertaken by passengers. Virgin Atlantic Airways has announced that it will bear the tax for passengers, which further increases the operating costs. In order to solve the problem, the Company carries out cost leading strategy, which can also be demonstrated in three aspects.

Firstly, most tickets of Virgin Atlantic Airways are tackled through the call center or the Internet and 99 percent of the tickets are electronic tickets, which is an important measure for cost saving. In the perspective of Virgin Atlantic Airways booking system, the cost of each passenger is one tenth of other large airlines. In the accounting department, only 3 people deal with the tickets, while large airlines need 50 to 60 headcount.

Secondly, Virgin Atlantic Airways also allows travelling agent companies to sell its tickets. Virgin Holidays, sister company of Virgin Atlantic Airways, has become British largest tour operators for the Caribbean schedule. For the off-season and tourism market, travelling companies have played an import role.

Thirdly, Virgin Atlantic Airways’ IT system and call center are often outsourced to companies in India and South Africa. Through this way, satisfied services are obtained with simplified procedures and low cost.

4. Comparison between the two airlines

British Airways and Virgin Atlantic Airways are two largest airlines in the United Kingdom. Both airlines have similar industry environment and political environment. However, the two airlines also have some differences in market and brand strategies.

4.1 Similar industry environment analysis

For strategic environmental analysis, Michael Porter's Five Forces Model can be applied to carry out the analysis. According to Michael Porter's Five Forces Model, there are five forces in the industry: threat of potential entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitutes and industry rivalry. (ME Porter, 2009)

 

Michael Porter's Five Forces Model

First and foremost, the threat of potential entrants is weak. For the civil aviation industry, the potential entrants don’t impose a serious threat on the existing enterprises. Aviation industry needs huge capital investments to support the operation. Aviation industry is a typical industry making use of scale economies to increase the industry. Pioneering enterprises tend to have other advantages in addition to the cost.

Secondly, suppliers’ bargaining power is strong. In the airline industry, Boeing and Airbus are the only suppliers of aircrafts. The industry concentration degree is relatively high, so bargaining power of the suppliers of aircraft is quite strong. In the process of negotiations with suppliers, the airlines are in a disadvantageous position.

Thirdly, passengers’ bargaining power is strong. Nowadays, aviation services of airlines are similar in the market. With the development of the Internet, passengers can obtain comprehensive and real-time information and make comparisons among different airlines.

Fourthly, threat of substitutes is weak. Threat of substitutes like trains and passenger vehicles depends on personal preferences, price, time and convenience. Both airlines are committed to the international long-distance routes, so threat of substitutes is relatively weak.

Fifthly, industry competition is strong. The aviation industry is a highly mature market and industry competition is very fierce. Due to the deregulation and a series of free agreements signed and entered into force, the number of enterprises in the industry is increased. At the same time, due to high exiting barriers in the aviation industry and sluggish economic situation, competition in the industry is becoming fiercer. In recent years, merger and reorganization in the aviation industry is further intensified competition. Therefore, both airlines face fierce competition from other airlines not only in the United Kingdom but also the international community.

4.2 Changes in the aviation industry of the United Kingdom

With the development of aviation industry, some changes have occurred mainly in three ways.

In the first place, the aviation industry is becoming more globalized. Europe and America have signed Open Skies Agreement. Under the agreement, all airlines of the European Union and the United States that have flight routes across the Atlantic are free to choose any international airport in Europe and the United States as the starting point and the ending point of the route. The agreement for both airlines is a double-edged sword. It expands the international market for both airlines and the route of fights can be more effective. it not only improves efficiency, but also intensifies the competition for both airlines.

Secondly, science and technology is continuingly developing by leaps and bounds. Contribution of science and technology of the civil aviation industry can roughly be attributed to three aspects of aviation safety, reduction of environmental pollution and improvement of the quality of services. Scientific and technological achievements related to the three aspects have emerged in an endless stream and constantly updated. The development of science and technology provides a more secure, environmentally friendly and high quality service environment for passengers. Enhancement of the level of science and technology can improve efficiency in the use of fuel and reduce operating costs.

Thirdly, environmental protection has attracted global attention. The global aviation industry is facing big challenges from environmental problems. Sustainable development is one effective way to meet these challenges. Both airlines have put forward green policies to tackle the environment problems. British Airways has issued the sustainability report to show its efforts on the environment problems. Virgin Atlantic Airways also lays emphasis on the environment with implementation of the green policies.

4.3 Different brand strategies

British Airways is the oldest airline in the United Kingdom. It defines itself as service airline, which targets on middle and high-ended passengers. It focuses on the development of business class and first class. It continues to improve the content of services, setting a high-end image.

However, the establishment time of Virgin Atlantic Airways is short, but its individuality is quite clear. The Company has launched a unique brand strategy. In the situation of serious aviation market homogenization, the Company has built its own brand, attracting the target consumer groups. "Virgin" represents a kind of enterprise culture, life attitudes and brand image. It advocates free, rebellious and open life way. It also advocates freedom and extremely precious romance. Behavior art, event marketing and fun is people’s expression on Virgin Atlantic Airways. The company's overall positioning is the youth and has a young and energetic team flight fleet. The company is a medium-sized international airline, mainly focusing on intercontinental routes. The image is consistent with the group and it has made its Group President’s distinctive personality characteristics expose to the public.

5. Competition between the two airlines

The two airlines target different customer groups and they use different competition strategy.

British Airways’ main customer base is located in the high-end travelers. These travelers are not sensitive about travel prices. It mainly markets business class and first class passengers and strives to become the first preferred airline for these customers. It launches frequent flight plans for these customers and a world alliance program.

On the contrary, Virgin Atlantic Airways carries out a mode of competition that is different from its competitors. Virgin Atlantic Airways shows vigor and youth, targeting customer positioning from 20 to 40 years old with certain economic ability like the middle class and white-collar staff who pursue fashion trend. The overall customer base location is slightly lower than that of British Airways, but has stability and sustainability. Meanwhile, Virgin Atlantic Airways lays emphasis on the development of economy class passengers, providing lower prices and rich entertainment to attract more passengers. The Company has set up a budget airline company in the United States.

Another distinctive competition method of Virgin Atlantic Airways is that it makes use of its CEO’s image to promote the Company. Richard Branson is very good at using his own image, attracting the attention from the public. However, British Airways has not carried out this strategy, because it is more conservative than Virgin Atlantic Airways.

6. Conclusion

British Airways and Virgin Atlantic Airways are two biggest airlines in the United Kingdom, both of whom have their unique strategy in accordance with the contemporary situation. In order to face the fierce competition and challenges, they have formulated different measures. British Airways doesn’t carry out low-cost strategy and focuses on the improvement of the quality of services and customers’ experience. Virgin Atlantic Airways carries out differentiation and cost-leading strategy and makes use of CEO’s image to promote its brand. Both airlines have played an important role in the development of global aviation industry and will continue to strive to provide more qualified services to passengers from all over the world.

Bibliography

Wikipedia. (2015), British Airway, Website.

Wikipedia. (2015), Virgin Atlantic Airways, Website.

British Airways. (2014), Annual Report and Accounts: Our strategy and objectives.

ME Porter. (2009), Porter's five forces model. Harvard Business Review, 34:50-55.

Wikipedia. (2015), PEST Analysis. Website.

J Long. (2011), Thought on sustainable development strategies of airlines under the low-carbon economy background. IEEE International Conference on Emergency Management & Management Science 105-108.

 

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