Porters five forces model is an environmental analysis tool that says that the structure of an industry and the ability of firms in that industry to act strategically depend upon the relative strength s of five forces: the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products and the rivalry among existing firms. The discussion below shows how each of the five forces of completion have shaped the US Airlines industry and impacted on the behavior of the various Airline companies operating in this market.
Virgin Atlantic Case Study
Key Learning Outcomes
- Use Porters five forces model to analyse an industry on the basis of the five competitive forces.
- Analyse the UK airline industry industry and how the five forces have affected Virgin Atlantic and rival firms like British Airways. and the impact on industry structure, attractiveness, and profitability.
- Understand how Virgin Atlantic defends against intense competition from British Airways, and the strategies it uses to create 'blue oceans' that are defensible, helping it capture market share and maintain competitive advantage.
Virgin Atlantic is a trading name of virgin Atlantic Airways Limited. It is a private company that was incorporated in 1984. It is a British Airlines with its head office in Crawley, United Kingdom. Since it holds Civil Aviation Authority (CAA) type A of operating license (AOC 534), virgin Atlantic is therefore permitted to operate as an airway to carry passengers, cargo, and mail on aircraft with 20 or more seats. It uses a mixed fleet of Airbus and Boeing wide body Aircraft and it operates to destinations in North America , the Caribbean, Africa, middle Asia. Virgin Atlantic operates with three class cabin configuration that is to say; the economy class, premium economy class and the business class. Virgin Atlantic operates ten lounges worldwide. It has nine “clubhouse” locations in London, New york, Newark, Boston, Washington DC, San Francisco, Los Angeles and Johannesburg. It also maintains a rival’s arrival lounge in London Heathrow. They are accessible for passengers travelling in upper class and flying club Gold tier members. Virgin Atlantic in the recent years has had codeshare agreements with the following airlines; Air china, Air New Zealand, Delta airlines, Flybe, Jet Airways, Singapore Airlines, virgin Australia among others. In 1985 when it made its maiden flight to America, it has never looked back since then. The Airlines even now operates local flights in America under the brand Virgin America. It has entered a complex US market which has over 100 certified passenger Airlines operating over 11 million flight departures per year, carrying over one third of the world’s total air traffic, with over 745 million passengers and employing over 545,000 employers and over 8000 air craft operating 31,000 flights per day. It is a market whose barriers to entry are less than expected.
In early 2017, Virgin Atlantic braced for a loss as a slump in the pound since Britain voted to quite the European Union. The CEO of Virgin Atlantic is quoted to have said “if you combine the competitive environment, which is reasonably intense, with a relatively weak pound, we do anticipate on our current projections that 2017-2018 will not be profitable. To avert such consequence and because of other reasons, Virgin Atlantic, Air France-KLM group and Delta Airlines announced their intentions to expand their strategic partnership and offer customers access to the most comprehensive transatlantic route network via an extensive joint venture. The enhanced venture became the airline partnership of choice for customers, since it promised to offer more than 300 daily non-stop trans-Atlantic flights.
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