Marketing Management
Growth and PESTLE Analysis for Virgin Group

Introduction

Virgin Group is a well known venture capital conglomerate leaded by Richard Branson that has been concentrating primarily in the travel, entertainment and lifestyle related industry. Today, the group has more than 300 subsidiaries companies worldwide. In this report, the analysis will be focus on Virgin Atlantic. This is because there are too many different businesses under Virgin Group, making the in-depth and reflective analysis on the entire conglomerate (with diversified businesses) hardly feasible. In order to perform meaningful and more concentrated analysis, researcher should focus on one of the business under the conglomerate. Besides, Virgin Atlantic is chosen because it is interesting to analyze how the company able to achieve superior success in one of the most competitive industry, namely the airline industry.

Methods and Reasons of Growth

Virgin Atlantic was founded by Richard Branson in 1992, and the company was made famous as it launched the first super economy services to the consumers. Since then, the company has been expanding fast, and the companies have been buying new planes, expansion of route network, and providing extraordinary passenger services to ensure customer satisfaction. The success of Virgin Atlantic is primarily due to the superior branding capability of Richard Branson. It is a well-known brand often associated with the personality of Richard Branson (Kingsley-Jones & Horton, 2011). Besides, the growth of the company is also contributed by daring to take on new innovation, such as provision of fast connectivity (Kirby, 2010), seat back television, and beauty therapy on the planes (Donnelly, 2008). The frequent innovations that take customer by surprise enable the company to distinguish and differentiate itself from the larger airline operators. As explicitly mentioned by Richard Branson (2010), the success of the company comes from having great people with lots of good ideas on how to do things differently. The company is also famous for it ‘Fun’ culture. Having a fun culture ensure the staffs to like the company more, perceiving it as the great place to work, and subsequently success in delivering the ‘Virgin feeling’ to the customers (Branson, 2011). It is the fun elements that successfully enable Virgin Atlantic to stand out from the highly competitive industry (Donnelly, 2008).

Apart from that, the company is marketing savvy, and exceptionally good in utilizing public relation and mass media to reach the public. As discussed by Simms (2008), Virgin is famous to play the hero roles in the marketing campaigns. Virgin often positioned itself as the challenger position that is committed to perform things betters and delivering better services to customers regardless of profits. Then, the company is also talented in pulling public awareness to the company, with different techniques and strategies. One of the frequently used techniques include the use of slogans, such as “Mine’s bigger than yours, No way BA/AA, Still red hot for 25 years and others”. This is not surprising, because as a relatively smaller players compared to the larger competitors such as British Airways, Virgin Atlantic have to think out of the box for creative strategies to growth and expand.

The road ahead for growth is challenging. To further strengthen its competitive position, the company is also looking for strategic alliances with other powerful airlines operators (Moores, 2010). This is necessary because the largest competitors, namely British Airways was allowed to merge with American Airlines (Analyst Wire, 2011). Furthermore, as the competition intensify, the company has just recorded a loss of GBP 132 million in the financial year ended 2010 (Flottau, 2011).

PESTLE Analysis for Virgin

Political Factors

In the airline industry, the relevant political factors are often regarding the fear of terrorism attack. Due to the conflicts of political or ideology from the west with certain people from the Islamic country, terrorism is a serious issue today (Tanguay et. al., 2010). Due to the threats of terrorism attacks, airline operators are required to spend more efforts on ensuring the safety of the flights, and to incur capital expenditures to install relevant safety tools and system on planes (Amernic et. al., 2004). All of these will definitely add to the financial burden of the airline operators such as Virgin Atlantic.

Economical Factors

Today, the economy around the world remains fragile, even after three years of slow recovery from its bottom in year 2009. In UK particularly, the unemployment rate remain high, and consumers are commented to be cautious and prudent in their spending habits. As such, in the short term, as long as the economy outlook remain gloomy, people may cut down spending, and travel less for leisure or tourism purposes. This will dampened the demand of air flights. Besides, when the economy is suffering, people may switch to cheaper costs airlines operators (Tierney et. al., 2008).

Besides, it is understood that the airline industry is a cyclical one. During recessionary times, consumers are getting careful with their discretionary spend, and airlines operators often see a serious drop in passenger volume (Jones, 2009). Furthermore, airline is a highly competitive industry. Rivalries among competitors are intense, and there are talks that consolidation is inevitable in the industry (Jones, 2009). In such an industry, the larger players often have advantages, by having significant cost advantage. Smaller players, however, should be more flexible, creative and innovative to different itself from the competition (Flouris et. al., 2005).

Social and Cultural Factors

Overall, the living standards of people are rising around the globe. Today, consumers are becoming more demanding. People simply have higher expectations on the level of services provided by businesses. Overall, consumers are becoming more aware on their rights, and understand their power in affecting the businesses profitability. Besides, people no longer buy products for its features. It is said that we are entering into an emotional economy. People need to feel to be touched in their buying decision making process (Kumar et. al., 2009).

From another view point, tourism activities are increasing due to globalization effects. Today, people are getting more interested to experience the different cultural setting and lifestyle of different people in other part of the world. It is cited that travelers around the world has been increasing. To visit to different places apparently become the new lifestyle of many people (Gudmundsson et. al., 2010). Such a trend is definitely beneficial to the businesses of airline operators.

Technological Factors

Many different technologies are affecting the business nature of airline in the past decades. One significant issue is the increasingly popularity of internet services and electronic commerce around the world. There are both good and negative impacts due to rising trends of internet users. For good points, internet enables the airline operators to reach larger audience, and to service them with a much lower costs structure. Of particularly useful application developed by airline operators include the revenue management program yield management program and customer relationship management program to enhance the profitability of the respective airline operators (Post, 2010). However, over the long run, internet effectively causes the airline industry to become a perfect market (Jones, 2009), whereby travelers can easily compare the air fares just within several click in front of their computer. Such a phenomenon is reasonably to affect pricing ability of airline operators adversely (Gal-Or, 2011).

However, the rise of internet marketing may offer opportunities to airline operators as well. For example, to use internet marketing and to promote a company through social media can be highly powerful way to reach people around the world with minimal costs.

Apart from that, as technologies improve, people may be expecting improvement of services provided by airline operators. For examples, the ability to adopt new technologies fast and to enable customers to access to high speed internet connectivity may strengthen competitive positions of certain airline operators.

Environmental Factors

Today, global warming is a serious issue affecting people and the next generation. People started to aware on the harms brought forward by short term oriented and self-fish business entities. The public are increasingly demanding that businesses should practice Corporate Social Responsibility in the development and growth of the businesses. Sustainable development and conscious efforts to ensure that the natural environment is protected is demanded from the corporations. This is a trend possibly affecting airline operators adversely, as gas emission from airlines operators is one of the root causes leading to global warming.

Legislative Factors

In different country, and depending on the changes in legal and regulations of the airline industry, different issues may affect the industry.

Conclusion

Overall, it is discussed how the successful Virgin Atlantic has been growing in the competitive industry landscape over the years. As a small player, the company often relies on creativity, innovation, and customer-centric philosophy to expand the business. Richard Branson is important leader in the company. He bring forward marketing insights and ideas, particularly in the public relation, advertising and promotion talents to develop the Virgin name into a high profile one around the world. Later, PESTLE analysis is carried out. Opportunities and threats facing the company are discussed and articulated.

References & Bibliography

Amernic, J. H., & Craig, R. J. (2004). 9/11 in the service of corporate rhetoric: Southwest Airlines’ 2001 letter to shareholders. The Journal of Communication Inquiry, 28(4), 325-341.

Branson, R. (2010, April). The importance of not being earnest in business. Canadian Business, 83(6), 13.

Brownsell, A. (2008, November). Seizing the advantage. Marketing,24-25.

Brownsell, A. (2010, March). Virgin Atlantic shifts to global marketing focus. Marketing,3.

Chitakornkijsil, P. (2010). Disaster and risk management in a global world. International Journal of Organizational Innovation (Online), 3(2), 97-113.

Donnelly, A. (2008, April). Virgin Atlantic ‘extras’ face axe. Marketing,2.

Flottau, J. (2011, January). Change of Fortunes. Aviation Week & Space Technology, 173(3), 33.

Flouris, T., & Walker, T. J. (2005). The Financial Performance of Low-Cost and Full-Service Airlines in Times of Crisis. Canadian Journal of Administrative Sciences, 22(1), 3-20.

Gal-Or, E. (2011). Pricing Practices of Resellers in the Airline Industry: Posted Price vs. Name-Your-Own-Price Models. Journal of Economics & Management Strategy, 20(1), 43.

Gudmundsson, S., & Oum, T. (2010). Selected Papers from the Air Transport Research Society Conference, Athens, 2008: Competitive Positioning in the Airline Industry. Transportation Journal, 49(1), 3-4.

Jones, P. (2009). Impact of the global recession on the hospitality and tourism industry. Tourism and Hospitality Research, 9(4), 363-367.

Kingsley-Jones, M., & Horton, W. (2011, March). BA covets Virgin slots but not brand. Flight International, 179(5280), 12.

Kirby, M. (2010, June). Virgin signs up for fast connectivity. Flight International, 177(5245), 10.

Kumar, S., Johnson, K. L., & Lai, S. T. (2009). Performance improvement possibilities within the US airline industry. International Journal of Productivity and Performance Management, 58(7), 694-717.

Moores, V. (2010, June). Branson prepared to surrender his virginity. Flight International, 177(5243), 10.

Post, D. (2010). Variable opaque products in the airline industry: A tool to fill the gaps and increase revenues. Journal of Revenue and Pricing Management: Special Issue: Agifors 2009 Conference, 9(4), 292-299.

Simms, J. (2008, February). Virgin plays the hero once more. Marketing,17.

Tanguay, R. (2010). Pervasive issues in the airline industry affecting united states aviation law and policy. DePaul Business & Commercial Law Journal, 8(4), 391.

Tierney, S., & Kuby, M. (2008). Airline and Airport Choice by Passengers in Multi-Airport Regions: The Effect of Southwest Airlines. Professional Geographer, 60(1), 15.

 

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