Virgin Atlantics primary problem is that they were operating in the middle of the optimal utility model. Their slogan had become “Offering a First Class service at less than First Class fares”. In which Virgin Atlantic is offering high quality at a low cost, which keeps them in the middle and not profitable. It seems that Virgin Atlantic did not take into account that offering a premium service as they were would come at a premium cost for them and when throwing in low cost fares into the mix they were creating a loss and expectations they will not be able to sustain for a long time. Starting off as a low cost premium airline aimed towards the business class may have been there way into the market and obtain market share but at some point they needed to work their way out of the middle of the optimal utility model and shift either towards high quality or low cost, not both simultaneously to stay profitable. Seeing that there number one goal was to provide premium innovative services/products they could have gone the route that Apple Inc. has done by providing innovative premium products at a premium prices rather than setting themselves up for future losses.
A recommendation for Virgin Atlantic’s primary problem of operating in the middle of the optimal utility model, in which consumers want either high quality or low cost products and services. Virgin should keep moving forward with innovation and providing a premium experience for all of their passengers but do it at a higher price so that they do not create any losses. Another route to go in would be to become a super low cost provider for their business class niche and stop spending on inflight entertainment and amenities and focus only on cutting costs which would allow them to be profitable as a low cost air transportation provider.
Another secondary problem is that during Virgin Atlantics pursuit to be innovative, top management neglected to make innovations that would help the company in terms of...
Please join StudyMode to read the full document