The main challenge facing Virgin Atlantic Airlines is identifying and executing a strategy that will help it become a more profitable and established airline in the industry going forward. Virgin had an income loss of 14.5 M pounds in 1991-92, and a small profit of 0.4 M pounds in 1992-93(Exhibit 2). In contrast, British Airways had $297.7 M profit which is 3.19% of its total sales in 1992 (Exhibit 10). VAA has been pursuing a marketing strategy to serve all classes of passengers with highest quality at lowest cost. Their commitment to quality is proved by the multiple awards they have won. However, although this strategy served VAA well during the last decade, it does not look sustainable in the long run, especially based on the financial results of the recent years. Recommendation
VAA should position itself as an airline that offers high quality to economy class customers who prefer and are willing to pay more for better service and comfort during their leisure travel. The trade-off for a higher quality flying experience would be higher prices than are currently being offered by VAA. Analysis
1. Our first step is to analyze the strengths and weaknesses of VAA.
Based on the above table, our view is that the core-competency of VAA that cannot be easily matched by any other major airlines is its work-culture. Other major airlines such as BA cannot afford to become as informal and entrepreneur as VAA can. Even though VAA has been an innovator in delivering better services and facilities, these advantages are easily imitated by other airlines as several examples from the case suggest. 2. Then we created the RFB matrix that illustrates VAA’s point of differentiation and competitive edge in the airline industry.
3. Next, we segmented the market. We first segmented strategically and identified those groups of buyers based on the purpose of travel (business / leisure). Then we segmented tactically based on the customers’ price...