Strategic Analysis of Virgin Australia Airlines: Following

Strategic Analysis of Virgin Australia Airlines:

Following its merger with Pacific Blue, Virgin Australia that was previously known as V Australia rebranded to Virgin Australia Airlines. In addition to being the newest international airline owned by Richard Branson, Virgin Australia is headquartered in Sydney Airport. The airline company has developed an airline experience that is based on a simple idea in which flying is considered to something great. Virgin Australia Airline has brought back style into travel through its attentive in-flight service, unique mood lighting, gourmet meals, top class in-flight entertainment, boutique bars, and generous legroom ("Virgin Australia Flights," n.d.). The merger with other airlines firms has enabled Virgin Australia to fly into several regions like Australia, the Pacific Islands, Thailand, New Zealand, Indonesia, and Papua New Guinea.

Internal Analysis of the Firm:

Virgin Australia Airlines holds a strong market position in the region's airline industry because of its internal factors that have enabled it to develop various key competitive advantages over its rivals. Some of the firm's main competitors include Tiger, Qantas, and Jetstar Airways that have continued to penetrate the airline market and industry. Some of the internal factors that have enabled Virgin Australia to establish competitive advantages over its rivals include its key capabilities and strengths. The strengths and key capabilities of the company include

Membership to a Big Family:

Virgin Australia Airlines belongs to a very big family known as Virgin Group that is regarded as the most highly respected international brands across the globe ("The Virgin Family," n.d.). The group has established over 300 branded organizations across the globe with a workforce of approximately 50,000 employees in 30 countries. Membership to the big group has given the group a major competitive advantage and strength since the Virgin Family emphasizes on principles of value for innovation, money, quality, fun, and competitive challenge.

Strong Working Relationship:

The other strength and key capability of Virgin Australia Airlines is its commitment to strong working relationships with the industry partners that it's currently partnering with (Eliezer, 2012). The strong working relations with industry buddies emanate from the firm's belief that a group of companies represents a huge range cross-section of the industry. Moreover, these relations are fueled by the need to partner with others in order to understand the changing needs of the industry for the improvement of service level.

Cost Advantage:

As compared to its competitors the domestic strength of Virgin Australia Airlines is attributed to its cost advantage. While the firm has frequent and daily flights across major cities, it provides discount flights to several key destinations and regional centers across Australia ("Virgin Blue," n.d.). It's a great choice for flights across Australia because of daily low fares that result in a strong market position in the industry. Virgin Australia Airlines adopted low-cost airfares strategy after analyzing the Australian airline market and identifying its flaws. The company has the ability to lower the costs of its airline tickets because of its lower operating costs that gives them a competitive advantage in the region's airline market.

Efficient Customer Service:

Virgin Australia Airlines is renowned for its efficient customer service, which is one of its major strengths. In addition to having a good human resource management department, the firm's operations are characterized by very relaxed and young people who speak on Virgin's customer service phone lines. Consequently, the company is the most on-time airline firm in the Australian airline industry coupled with a good flying record and aircraft (Dayal, n.d.).

Strong Financial Position:

Due to its cost advantage and membership to the huge Virgin Group, Virgin Australia Airlines has a strong financial market in the domestic airline industry. The low fares have made the company an attractive choice for many customers in the region, especially those flying the vital Melbourne and Sydney business route. As customers continue to stream for Virgin's services, it makes profits that result in a strong financial position and competitive advantage.

However, despite of these major strengths and key capabilities that have enabled Virgin Australia Airlines to maintain a strong market position and competitive advantage in the airline industry, the firm also has some weaknesses. The two main weaknesses of Virgin Australia Airlines are the company's lack of diversity and weak management team. The firm's lack of diversity is evident from the fact that it has emphasized on staying in the leisure market and invasion of the corporate sector. As a result of the focus on these two segments, Virgin Australia Airlines has adopted the strategy in one airline instead of the dual brand strategy used by two of its major competitors i.e. Qantas and Jetstar ("Virgin Blue Named Best," 2010).

Virgin Australia Airlines has expressed its weak management team through the management changes it has adopted in the recent times. Actually, the firm announced huge changes to its ownership structure in 2011 that created a new structure that involves a new unlisted entity. While the other weakness is not so evidential, Virgin Australian Airlines is not an Australian owned company since it belongs to the Virgin Group.

External Analysis of the Firm:

The external analysis of Virgin Australia Airlines basically deals with the opportunities and threats to the organization's operations. These opportunities and threats have a huge impact on the firm's operations necessitating the need to adopt effective business strategies in order for the company to maintain its strong market position in the industry. Some of the major opportunities for Virgin Australia Airlines include expansion into international markets and innovation strategies.

The company has adopted a huge expansion strategy that focuses on extending its services into new markets across the globe that provides new business opportunities. In 2011, Virgin Australia Airline began to look for Asian partners in order to extend its operations into this region. The company's CEO outlined the scope and timescale of the Asian expansion plans that sought to establish operations in the entire Asian region (Walton, 2011). As the firm seeks to covet other parts, global expansion is a huge business opportunity since it's based on a long-term and complete strategy. The expansion strategies are coupled with innovative strategies of the firm's services as evident in its plans for invading the corporate sector.

On the other hand, the major threats to Virgin's business operations are the increased competition in the Australian airline industry and market volatility. Currently, the firm's major competitors i.e. Qantas and Jetstar Airways have adopted low-cost pricing strategies that have increased rivalry in the market. Moreover, the volatility of the Australian airline market is also a major threat to its operations. Actually, this market has started to show signs of slowdown at a time when many firms were enjoying yield premiums even as the international market has weakened significantly ("Australian Aviation Market," 2012). Similar to other airlines, Virgin Australia Airlines experiences two major threats of the Europe's sovereign debt crisis and rising oil prices that are hanging over the fortunes of the industry ("The Big Squeeze," 2012).

Industry Analysis through Porter's Five Forces:

The Australian domestic airline industry and market is regarded as an industry with three dimensions that overlap at certain times. First, this industry is a national market whose size for air travel is related to the total number of airlines that are competing in it (Joy, 1986). Secondly, the industry is increasingly limited horizontally because of the consideration of the global airline market either as the huge number of city-pair markets or number of regional markets. The third dimension of the industry is that it has several different opportunities for airlines to establish local niches for themselves. The Australian airline industry can also be further understood through Porter's five forces of industry analysis as explained below

Threat of New Entrants:

The Australian airline industry has a moderate threat of new entrants into the market because of the existence of several entry barriers that prevents many firms from entering the market or industry. Some of these barriers to entry include finding a terminal space at the airports since most of the existing terminals have been leased out to major airlines, increased taxation on aviation fuels, and high start-up costs.

Buyers Bargaining Power:

The bargaining power of buyers seems to be moderate in the Australian airline industry because a large percentage of the sales of domestic airline tickets are to in-coming tourists, the business or corporate sector, and domestic tourists. Moreover, the introduction of cheaper alternatives into the airline market such as Virgin Australian Airlines enabled customers to have more options of services and prices.

Suppliers Bargaining Power:

Similar to the bargaining power of buyers, the Australian airline industry has a moderate suppliers bargaining power. This is largely because the airline supply business is dominated by a few companies with less competition among suppliers. This is coupled by the minimal possibility of suppliers to integrate vertically since their material inputs into the industry are not of commodity nature.

Threat of Substitutes:

Since the Australian airline industry can be regarded as a regional market, there is a high threat of substitutes. In most cases, regional airlines experience slightly higher threat of substitute as compared to international carriers. The existence of several competitors in the industry has contributed to the high threat of substitutes as customers consider factors like convenience, money, time, and personal preferences for air travel.

Competitive Rivalry:

There is a high rate of competitive rivalry in the Australian airline industry since the industry in characterized by strong competition that has kept profits grounded ("Australian Airline Industry," 2011). This is accompanied by strong-price-based rivalry among competitors that have adopted price-cutting strategies in order to increase profitability.

Company Analysis of Virgin Australia Airline:

The main idea of Virgin Australia Airline is to identify itself as one of the leading Australian firms with lowest fares that provide customers with low fare services through ongoing development of its services that promote low cost offerings (Nayeemuddin, 2009). In order to achieve this, the firm has adopted escalating techniques that were introduced by some well-established airlines and reduced costs through restricting its services to airports by operating on a single flight. Therefore, the main business level strategy of Virgin Australia Airlines is cost containment and efficient operations that are based on several key components. For low-cost airlines, there is a great need for differentiation of products and services through the provision of frill containing products to customers. The differentiation strategy for Virgin Australia Airlines was its introduction of a multi-channel satellite TV in its flights that are highly rated by customers on the basis of value for money.

In addition to strong financial and market positions, Virgin Australia Airlines has continued to be successful in the airline industry because of several factors of success. The key drivers of the firm's success are low-cost fares, efficient customer service, and product differentiation. The company's success is attributed to its pursuit of extensive product and lounge upgrades as well as loyalty components that adds up to the quality aspects of its services (Sandilands, 2012).

As part of its deviation from the classic LCC formula that it adopted during its early years of operation, Virgin Australia Airline has adopted the New World Carrier strategy, which is also a strategy for the future. The strategy has two major goals i.e. maintaining its cost leadership and attracting the effective fare levels of legacy carriers ("Overview -- Virgin Blue," n.d.). The company will transform this strategy in the future in order to enhance its network and provide high frequencies to a broad domestic market. As the firm enters into a new phase of global operations, it will expand its New World Carrier Strategy into new markets.