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Strategic Management and Leadership

STRATEGIC MANAGEMENT & LEADERSHIP

Executive Summary

An industry's microenvironment and the microenvironment determine the business strategies or the overall performance of an organization to be successful in the competitive market. The following assignment is based on the Virgin Airlines macro & micro environmental factors along with the European context environmental setting of the UK. A PESTLE analysis has been done in the paper to explore the impacts of the macro-environment on the organization.

On the other hand, an analysis of Porter's five forces model has helped to find out the impacts of the microenvironment. SWOT analysis has defined the industry's potential scenario in the following study. However, some strategic and helpful recommendations have been generated for the airline industry Virgin Airlines by following the actions of Bowman & Porter.

Introduction

An organization's macro environment and the microenvironment have a positive influence on the policies and decisions of the business, organizational activities, and marketing strategies. The following assignment is based on the exploration of the Virgin airlines' contemporary market scenario, along with the European airline industry's business context. PESTLE analysis, SWOT analysis and Porter's strategic clock would be analysed in the study to evaluate the contemporary business market of Europe. Porter's five forces model would also be highlighted in the study to analyse the Virgin Airlines business strategy for the development of the business.

Background of Virgin Airlines

The Virgin Airlines is well-known as "Virgin Atlantic" which is a branch of the Virgin Groups. Richard Branson was the founder of this airline industry, and it was founded in 1984 (McKenna, 2018). The firm Virgin Airlines took the mission of becoming a "profitable" airline industry by providing people satisfaction with its services along with a satisfactory organizational culture. The people would be satisfied and would make their journey with the company over and over. It would have an effective positive impact on the overall performance of the organization. Revenue has been recorded by Virgin Airlines of 26.89 billion of the British pound that was sterling in 2016 (Zakharova, 2017). Recently, the macro-environmental factors and the micro environmental factors have impacted on the business performance of the industry.

PESTEL Analysis of Virgin Airlines

An organization's macro environment comprises of the harmful external factors that can have negative impacts on the business performance and activities along with the organization's decision making (Zhaoet al., 2016). It is essential to have a brief analysis before the exploration of a new market along with the feasibility judgement. It is also necessary for the plans of launching a new product or its service for making the crucial decisions of the business. The country's political conditions have been identified as the macro-environment prime factors. The activities of the business have been conducted with the use and development of technology, ecological factors, socio-cultural factors and moreover, demographic factors.

Figure 1: Macro Environment Factors

(Source: Zhao et al., 2016, pp-152)

Virgin Airline's business decisions have been governed by the European countries' political, social, legal and economic factors. However, the PESTLE analysis is being conducted for exploring the impacts of the macro-environmental factors on Virgin Airlines' business performances and strategies.

Political factors: It has been identified that the UK's political factors have impacted the Virgin Airlines' policies and business decisions. The factors are the governmental support, laws of employment, international relationships and governmental stability (Kumar, Dass and Kumar, 2015). The United Kingdom's "Her Majesty's Government" has been identified as responsible & trustworthy for the reasons of the political peace in the UK. Virgin Airlines has contributed to a positive environment of conducting business activities along with a satisfactory political environment for the political stability of the UK. On the other hand, some threat factors such as unjustified chaos, debates and rumours have been identified. The factors can harm the recent discussions of BREXIT have generated the Virgin Airlines business revenue. UK's international relations with other countries have been strengthened by the neighbouring countries' higher communication systems. It has helped the country to be a big platform for Foreign Direct Revenues. The incidents have facilitated the company into two aspects, such as:

  • Improved customer engagement & airlines services higher demand as a medium of communication system have been ensured by a healthy international relationship.
  • The increased number of foreign investors has empowered the company. It has helped to develop the percentage of investment in the business performance for advancing customer services.

The government of UK has decided the corporate tax rate as 19% for the year 2019, and it would be reduced by 1% for the upcoming year. However, the corporate tax has been identified as beneficial for the development of the business activities of Virgin Airlines. The airline services have favoured the UK government as the government shares the GDP rate of the country by 3.3% (Sezgin and Yuncu, 2016). The political stability has impacted the company's policies along with its activities among the domestic parties.

The economic factors that had been influenced by the economic stability: The identified economic factors are investments for the business, offered services prices, business decisions, exchange rates, the UK's economic growth, market shares, taxes and GDP. Factors such as inflation or deflation can be avoided when a country has political stability. The global market has declared the UK as the World's 7th ranking country regarding GDP. It can be evaluated that the UK's residents' economic condition was a little better than the economic conditions of the other developing countries. Higher demand for the products and along with its affordability can be caused by a country's satisfactory and comfortable financial and political situation (Feng, Zhou and Yang, 2019). The UK's people's affordability has ensured the consideration of the trading purpose with the approval of the UK's residents. Virgin Airlines has always favoured the high demand and high affordability of the UK's citizens.

On the other hand, the other countries' comparatively slower growth of the economic condition has been identified as a negative indication for Virgin Airlines. The client countries play a crucial role in setting the policies and objectives of the business, along with the adjustment of the service margin's prices and their investments. The UK government has experienced a GDP rate of 1.8% in the last year (Su and Zhao, 2019). The demand for luxury products and services of the public increase at a rate when the GDP rate starts to increase. The country has experienced an inflation rate of 1.8% after the decrease meant of 0.68% than the previous year. The factor has a higher inflation rate's adverse impact on the purchasing power of the consumers.

Social factors: The identified social factors are the society's preferences, people's age distributions, education, lifestyle and their points of views that are responsible for influences of the Virgin Airline's macro environment. The UK residents do like to travel by air for their vanity purposes. The people of the UK always are in favour of air services until they can afford the cost. The research showed that 18% of the entire population is above 65 years. It has been identified that the communication system of the airline industry seemed to be difficult for aged people. However, a smooth and secured journey is always preferred by the older people of the UK, and the Virgin Airlines target market is getting wider day by day. Hence, the young generation has been found as inclined to the roads services.

Technological factors: the UK has been identified as a developed country in terms of technological improvement in the global market. The Virgin Airlines company has experienced both positive factors as well as threat factors by this technological improvement. The company's services have been increased at a rate after the implementation of new technologies along with the increase of the risk factors. On the other hand, the road vehicles' uses have been influenced by the implementation of the latest "Android Auto", "Teen Driver Technology" and "cross-traffic alert". The airline's services have experienced a challenge for the telecommunication system's advancement. However, substitute options of the technological improvements' are essential for an organization's business policies and decisions.

Legal factors: The Employment Act 1996 ensured the UK employees' security and safety of the job. Equality Act, 2010 ensured that the racism issues or the discrimination issues should be reduced bu the inclusion of the country. Consumer Protection Act, 1987 has protected consumer rights. These laws have prevented the Virgin Airlines to develop its arbitrary policies for the development of the business. Any action that did not adhere to the regulations list used to be considered as a prohibited and illegal activity in the business context (Mokaya, M’Nchebere and Kanyagia, 2017).

Environmental factors: The environmental factors include the bad weather conditions that usually determine the flight take-offs and the flight landings. The flight's arrival and departure can be delayed by some specific reasons such as thick fog, tornadoes, clouds and storms. Road vehicles get preferences by the people in these conditions that can cause a major loss in Virgin Airlines. Tornadoes make a huge loss in the airlines business. However, the technological improvement needs to support the organization with a substitute plan that the organization can be able to take such steps against the environmental factors.

Overview

Macro environment factors

Favourable/ not favourable

Political

Favourable

Economical

Favourable

Social

Almost  favourable

Technological

Somewhat favourable

Legal

Depends on the nature of the organization

Environmental

Somewhat favourable

As per the above study, it has been analysed that the economic factors and the political factors usually have influence on the organization’s business activities. On the other hand, legal obligations, social preferences and the environmental changes also impacted on the business decisions.

Analysis of Virgin Airlines using Five Forces Framework

Stakeholder Analysis

Stakeholder

Classification

Justification

Employee

Internal

The employees are responsible for the basic operations of the Airline. All the activities are being executed by this class of stakeholder.

Managers

Internal

The managers are responsible for the taking of the crucial and effective decisions of the operations aligning the proper work function management.

Customers

External

The customers are the class of the stakeholders that gets the benefit of the services of the Airline and in turn provide them with financial returns.

Supplier

External

The suppliers are also responsible for the supplying of the raw materials that would help in executing all the activities of the Airline.

Stakeholder

Interest

Involvement

Influence

Employee

Innovative technology and features

Advertisement and the spreading of the product

Internal growth

Manager

Market value of the product

Making a reliable reach to the true interest.

Organizational development

Customer

Transportation

Future demand

Better pricing and features

Supplier

Profit from the supplied materials

Genuinely of the products.

Reliable products

Porter's five forces model comprise of analysis of the effective identification of the external work alignment and factor evaluation for the prospect of defining the operations (Mathooko and Ogutu, 2015). The porter's five forces model would help identify the evaluation of the factors defining the external environment of the company, Virgin Airlines. The porter's five forces model is applicable for the evaluation of the information that supports the development of the effective and implied management of the information. The porter's five forces model applies to the company's external scenario analysis. Five factors deeply form the impact on the wellbeing of the company and its power in the competitive market. These factors include the bargaining power of the buyers, bargaining power of the suppliers, threats of new entrants, threat of substitute products, and rivalry of the existing competitors. These forced would act upon the factors impacting the management of the processes of the companies. The substantial evaluation of each of these factors can result in the proper and effective management of the activities. The prospects of each of this subsection have been explained below,

Bargaining power of the buyers: it helps in explaining the impact of the buyers on the decisions and processes of Virgin Airlines. The power of buyers depends on the Virgin Airline's operational and discrete function analysis. The continuous development of the bargaining power of the buyers (customers) would for the impact on the effective development of the processes. The high bargaining power of the buyers would result in the high dependency on the buyer's perception for any operation in Virgin Airlines. The medium bargaining power of the buyers would result in the medium dependency on the buyer's perception for any operation in Virgin Airlines. The low bargaining power of the buyers would result in the low dependency on the buyer's perception for any operation in Virgin Airlines. The Airline Company has the high bargaining power of buyers as the company is a service industry, and its whole operation is dependent on the passengers of the airline. The high buying power would also result in the major factor development for the strategy implementation in regards to the customers (Heshmati and Kim, 2016).

Buying power of the suppliers: it helps in explaining the impact of the suppliers on the decisions and processes of Virgin Airlines. The power of suppliers depends on the Virgin Airline's operational and discrete function analysis. The continuous development of the bargaining power of the suppliers (customers) would for the impact on the effective development of the processes. The high bargaining power of the suppliers would result in the high dependency on the supplier's perception for any operation in Virgin Airlines. The medium bargaining power of the suppliers would result in the medium dependency on the supplier's perception for any operation in Virgin Airlines. The low bargaining power of the suppliers would result in the low dependency on the supplier's perception for any operation in Virgin Airlines. The buying power of the suppliers of Virgin Airlines is medium as many suppliers are ready to supply products. However, the suppliers of the company are very loyal and have been providing them with unique raw materials for their operations (Siering, Deokar and Janze, 2018).

Threats of new entrants: The threat of new entrants is very effective for the marking of effective documentation and alignment. The impactful evaluation of the works was done for enduring the evaluation of the implied management and formation. The new entrants of the market would form the major division of the market share among the competitors. The high threat of implying new entrants for the competition would be harmful to easing the development of the effective management of the operations. The entrants would form the issue in harming the situational development of Virgin Airlines. The number of competitors is increasing, and it has become very common for the Virgin Airline to deal with the existing competition. The varied offers had also resulted in forming domain issues for the company. There is scope for the new entrants in the market resulting in the major issues for the development of the factors. The company faces the medium threat of the new entrants for competing in the market.

The threat of substitute products: The threat of substitute product is very effective for the marking of effective documentation and alignment. The impactful evaluation of the works was done for enduring the evaluation of the implied management and formation. The substitute product of the market would form the major division of the market share among the competitors. The high threat of implying substitute product for the competition would be harmful to easing the development of the effective management of the operations. The substitute product would form the issue in harming the situational development of Virgin Airlines. There is a low threat of the substitute product for the Virgin Airline. The factors would take form in developing major issues in the development of the impact of substitute product management. The integration issues would also enable the formation of the specific management of the factors.

The rivalry of the existing competitors: The existing competitors would result in forming the impact on the growth and development of Virgin Airlines. The rivalry of the existing competitors would also form the issues in the development of the specific and implied issues for the users. The extensive rivalry between the Virgin Airline and its rival companies have a significant impact on the growth and development of Virgin Airlines. The intense rivalry of the competitors would form a direct impact on the strategies and operations of Virgin Airlines. The Airline Company has a high degree of the rivalry of the existing competitors as the company is a service industry, and its whole operation is dependent on the passengers of the airline. The struggle for the gaining of the market share would also result in the major factor development for the strategy implementation in regards to the customers. The number of competitors is increasing, and it has become very common for the Virgin Airline to deal with the existing competition. The varied offers had also resulted in forming domain issues for the company (Pattison and Quelch, 2016).

Strategic Recommendations for Virgin Airlines

SWOT analysis

The SWOT analysis refers to the tools that help in the internal analysis of the company using the factors of Strengths, Weaknesses, Opportunities, and Threats. These factors can help in evaluating the existing technological innovation and making sure that the factors can result in the growth of the Virgin Airline Company. The SWOT analysis would ensure the identification of the factors that can help in making sure that the factors aligning the management of the operations would enable the utilization of the innovative work function management. The SWOT analysis deals with the concept of identifying the internal factors having a major impact (both positive and negative) on the growth and development of the company. The analysis of Virgin Airlines using SWOT analysis is given below,

Strengths

Transparency in operations for the customers

Positive approach in development

Strategic development

Weaknesses

Lack of global operations

Lack of skilled employees

Lack of creativity in operations

Opportunities

Growth of effective communication

Global market expansion

Increase of Economic Stability

Threats

Increment of competitors in market

Communication issues by BREXIT

Weather Issues for operations

The following is the explanation of the points of SWOT analysis factors for the Virgin Airline as mentioned above,

Strengths: The strengths section of the SWOT analysis provide an overview of the factors that can help in the future growth and development of Virgin Airlines. The increment of the company's profile would be marked with the effective and influential development of the information. The evaluation of the strength factors would ensure the constant deployment of the operations aligning the growth and development of the company. The strengths of the company include transparency in operations for the customers, positive approach in development, and strategic development. The operations of the company are largely supported by the transparency of the processes to the customers. The customers can readily accept transparent operations and stick to the services of the company. The positive approach taken by the company for improving the effective work function management would be another major role in defining the factors. The consideration of the positive factors can result in the easing of the operations with the consent of improvement. The strategic development also plays a crucial role in the growth of the company. The alignment of the strategic development factors can also tend to form the impact on the improvement of the company (Anwar Husnain, Adnan and Jabbar, 2017).

Weaknesses: The weaknesses section of the SWOT analysis provide an overview of the factors that can resist in the future growth and development of Virgin Airlines. The increment of the company's profile would be marked with the effective and influential development of the information. The evaluation of the strength factors would ensure the constant deployment of the operations aligning the growth and development of the company. These weaknesses must be overcome for ensuring the growth of the company in the time being. The weaknesses of Virgin Airline include lack of global operations, lack of skilled employees, and lack of creativity in operations. The lack of global operations is a major weakness of the company. The current age in of global integration and all the activities are required to form the improvement of the factors. There is the bare minimum number of employees who are well trained and skilled in terms of the operations. It is very crucial for introducing many new and skilled workers for the company. The similar approach in providing the services to the customers has made in dull for them. There is a lack of creativity in the services that can be done for attracting more customers at Airline (Zahari and Romli, 2018).

Opportunities: The opportunities section of the SWOT analysis provide an overview of the factors that can be the prospect for future growth and development of Virgin Airlines. The increment of the company's profile would be marked with the effective and influential development of the information. The evaluation of the strength factors would ensure the constant deployment of the operations aligning the growth and development of the company. These opportunities must be cashed on for enabling the effective and influential development of the company. The opportunity factors for Virgin Airline include growth of effective communication, global market expansion, and increase of economic stability (Khurshid and Fatima, 2016).

Threats: The threats section of the SWOT analysis provide an overview of the factors that can decline the growth and development of Virgin Airlines. The increment of the company's profile would be marked with the effective and influential development of the information. The evaluation of the strength factors would ensure the constant deployment of the operations aligning the growth and development of the company. Some contingencies planning must be used for overcoming these issues in the future for the betterment of the company. The threats of increment of competitors in the market, communication issues by BREXIT, and weather issues for operations have a significant impact on the development of Virgin Airline(Gupta, Gupta and Gupta, 2019).

Bowman’s strategic clock

Porter and Bowman Model have been used for providing some strategic recommendations for the airline industry Virgin airlines to develop the business quality (Tukdeo, 2016). The Porter and Bowman model comprises of 8 factors that are necessary for providing some basic recommendations to any organization for betterment. The essential eight factors are hybrid, focused differentiation, differentiation, monopoly pricing, low price with low value, risky high margins, low cost and loss of market share (Desai, 2019).

Figure 2: Porter and Bowman’s clock

(Source: Haselwanter, Muskat and Zehrer,2016)

The first aspect of this model is a hybrid that can be used in the strategic recommendation portion. This aspect suggests matching the offering price of the product with the customers' preferable prices in a regular manner. Virgin Airlines can think about increasing the service value and provide it to the customers (AwaisNadeem and Hafeez, 2015).

The next aspect is the focused differentiation that refers to the high-quality luxury products' production, and the prices of the products are high. Targeted promotion, marketing, distribution strategies and proper segmentation are used in this strategy. Virgin Airlines can consider reducing the prices of the tickets that it can be affordable for the customers. The airline's authority would also maintain the quality of airline services. This strategy would have a positive impact on the passengers' minds, and the overall performance of the organization would be increased (Yang, 2019).

Risky high margins define the strategies of minimizing the risk factors along with setting risk margins in the organizational business. Virgin Airlines can follow this strategy (Rahman, Azad and Mostari, 2015).

Monopoly pricing refers to the business types that can be used by the specific companies who maintain some basic strategies for planning the products' prices in an organized manner. The Virgin airlines can not follow this strategy as imitable services used to be provided by them.

The Virgin airlines should avoid the marketing strategy of the loss of the market share as this strategy can minimize the allover market share of the organization along with the market value (Eyvrigh, 2016).

Next comes to the differentiation aspect that refers to the maintenance of providing high-quality products along with an affordable price, and the service quality would also be maintained. Virgin Airlines can implement its strategy for developing market share and value (Yang, 2019).

Low price aspects refer to the low price of the products that it can be affordable for the customers, and the customers would like to travel with the airline industry. Allover sales volume of the organization would be increased.

Earning benefit from the market was not the actual mission of Virgin Airlines. The company can think about implementing the strategy of low prices along with lo-added value for determining the low-prices of the products to satisfy the customers' perceptions about the benefits of the company (Rahman, Azad and Mostari, 2015)

Conclusion

It can be concluded that an organization's macro environment and the microenvironment had a positive influence on the policies and decisions of the business, organizational activities, and marketing strategies. The following assignment was based on the exploration of the Virgin airlines' contemporary market scenario, along with the European airline industry's business context. The SWOT analysis referred to the tools that help in the internal analysis of the company using the factors of Strengths, Weaknesses, Opportunities, and Threats. Porter's five forces model comprised of an analysis of the effective identification of the external work alignment and factor evaluation for the prospect of defining the operations. Bowman's strategic clock also had been analysed in the study.

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