Introduction:
Today, competition in international markets has become severe and in order to sustain relevant position, organizations need to assume competitive strategies so that they can gain competitive advantages. (Rao, pp.185, 2011) The dynamic condition of markets has made it complicated for the organizations to achieve higher level of success without using experts’ promulgated models and literatures. (Flouris, Oswald, pp.19, 2006) Hence, researches have made it simple for the organizations to compete at broader level yet these researches merely gives way to these organizations and they need to develop the strategic plans on their own.
Different companies adopt different kind of competitive strategies in order to get higher position in competitive market and for this purpose, it used to perform different activities than the competing firms. (Daft, pp.65, 2009)Virgin Airlines is one of the organizations who have assumed authentic strategies in order to satisfy customer’s need and ultimately got exceptional position. This paper is basically an analysis of the competitive strategy of Virgin Atlantics which it has used in order to gain competitive advantage. The first section analyzes the competitive strategy of Virgin Atlantics, second part deals with advantages and limitations and third part give certain recommendations to Virgin Atlantics in order to better its services.
The Term Paper on Generic Competitive Strategy
There are many strategies that organizations can incorporate in today’s business environment. An organization can decide to take on a low-cost provider strategy, a focused low-cost strategy, broad differentiation strategy, focused differentiation strategy, and/or a best-cost provider strategy. While all of them have their own unique features and can offer a competitive advantage over its rivals, ...
Competitive strategy of Virgin Atlantics:
Porter has identified four different strategic options which an organization can use in order to gain competitive advantage keeping the contemporary internal and external environment under consideration. (Griffin, pp.244, 2010) differentiation strategy is one of those competitive strategies promulgated by Porters In his Generic Strategic model. (Eldring, pp.6, 2009)Virgin Atlantic has based its strategic plan keeping differentiation strategy under consideration. However, if its strategy is scrutinized, it indicates that this strategy has been developed after doing thorough internal and external analysis.
As far as internal analysis is concerned, this analysis demonstrates strengths and weaknesses of the organizations and for this purpose, different models like SWOT analysis can be utilized since it allows the organizations to analyze strengths and weaknesses of the organization. (Dibb, Simkin, pp.28, 2008) Virgin Atlantic has also based its strategy keeping internal analysis under consideration since its analysis demonstrate how internal analysis aids in having differentiation portfolio and potential customers. (Strauss, pp.106, 2010) The basic strength of Virgin Atlantic is the financial affiliation which it has with Singapore airline. (Reynolds, Lancaste, 2012) However, its financial information is not disclosed publicly yet it can be found out that the service has been differentiated by the company through identifying the core strengths and cost effectiveness is one of them.
As far as weaknesses are concerned, Virgin Atlantic is though providing exceptional services to its customers yet for customers, it is costly. A normal customer cannot have first class or premium class service with this Airline. However, the solution has been provided in the form of three different classes and the average customers can utilize economy class for traveling to different destinations.
Similarly, the external analysis has been done through doing market analysis, customer analysis, industry analysis and above all competitive analysis in order to gain competitive advantages. For this purpose, usually PESTEL analysis is done which identifies political, economic, social, technological, environmental and legal aspects of the provided services. (Henry, pp.51, 2008) Virgin Atlantic also does PESTEL analysis at macro level in order to gain complete competitive advantage through identifying all essential factors and after doing this analysis, it has developed its differentiation strategy for international market.
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Porter’s differentiation strategy can be observed from all the perspectives including packages, offers, services etc. For example, it has been offering services for more than 30 different destinations with 43 outstanding aircrafts including airbuses, Boeings and aircrafts. Similarly, this airline has bases in Manchester and London’s Heathrow and Gatwick airports and offers services for thirty different destinations including Dubai, Mauritius, Delhi, Sydney and Cape Town, the tourist favorite areas.
Moreover, normally airlines offer business and economy class but Virgin Atlantic has three different classes including upper, premium economy and economy classes. In addition, it has infused differentiation strategy through providing Virgin Atlantic Cargo and Holiday services which offers instant and urgent shipments to different destinations of the world. Similarly, different travel packages with outclass offers have also been facilitated to customers in order to gain competitive advantages through dissimilar features.
All these examples indicate how differentiation strategy of Porter’s Generic model aids an organization to gain benefits but for this purpose, organizations usually charge premium prices as well. Virgin Atlantic is also costly from other airlines in the market but its unique services have made it ample popular that more than five million customers use its services worldwide and all of them are ready to pay high prices for premium services.
The competitive strategy of Virgin Atlantics has been developed keeping the market trends and contemporary needs of the customers under consideration and not only unique and different facilities have been provided but also basic requirements have been fulfilled. Hence, the competitive strategy of Virgin Atlantics has made it successful and preferable for the customers among all large air service providers.
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For using differentiation competitive strategy, this organization has been cherishing exceptional advantages and some of them are as followed:
Advantages:
If the analysis of advantages for using differentiations competitive strategy is scrutinized from the perspective of The Strategy Clock, it would appear that the organizations, who utilize this competitive strategy, gain high benefits investing low amount.
Source: (Johnson, pp.243, 2008)
This thing can be seen from the example of Virgin Atlantics since it has been using different sources to differentiate its services from others in order to gain competitive advantage and hence, achieved high profit in low amount as well.
In current markets, the first advantage which Virgin Atlantics has been cherishing is the distinctive position due to providing unique services. Differentiation strategy allows Virgin Atlantics to have distinctive market position that makes it different from other competitors in the market and compels customers to prefer it on other competitors in the market providing similar service. (Thompson, Martin, pp.191, 2010)
Second advantage of using this strategy is that it enables Virgin Atlantics to have sustainability in current market environment through gaining competitive advantage. For example, through providing unique services with exceptional features like multi-destination services, entertainment and customer care, shipping service, holiday packages, Virgin Atlantics invested little amount as compared to others but gained double benefits which enables it to have remarkable position in the market.
The third major benefit of this differentiation strategy is flexibility which the organization provides. (Doise, pp.82, 2008) Virgin Atlantics also provides ample flexibility to customers in order to allow them to choose from multiple options. For instance, the customer can choose travel class from offered three classes according to his requirements. Suppose if customer has normal budget, he can select economy class whereas if he wants luxurious travel, he can select upper class. Flexibility is offered in packages and customers can choose relevant holiday packages of Virgin Holidays as well. Hence, this thing also proved ample lucrative for the company to achieve competitive advantage in contemporary markets and its environments.
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Limitations:
In current dynamic business environment, using differentiation strategy is though beneficial but only to some extent since there are certain limitations cling to this competitive strategy, some of them are as followed:
•It is very difficult to sustain elements of differentiation in current business environment since there are potential competitors in the market who try to assume better strategy in order to compete with Virgin Atlantics. These competitors might offer better services and add-ons that might affect core strategy of Virgin Atlantics
•Changing services and making it unique is often costly. Though core strategy never costs high but sustainability of differentiations strategy usually costs high because the organizations have to spend a major amount in competing with opponents which ultimately compel the organizations to invest more and more for sustaining its position. (Sornarajah, pp.173, 2010) Virgin Atlantics has also faces this situation and spent a large amount on routes and aircrafts in order to differentiate its services from others.
•Third limitation is the difficult which Virgin Atlantics has confronted in order to achieve differentiation. Since the current market is highly competitive and every organization has been trying to find out the best sources for gaining customer loyalty, this thing has made it ample complicated for the organizations to differentiate their services from others.
Hence, differentiation competitive strategy is ample lucrative but these limitations makes it difficult for the organizations to sustain this strategy. However, in order to cope with these dynamic situations, different steps can be taken and the next part of the paper will promulgate all key steps which can augment profitability ratio.
Recommendations:
Virgin Atlantics can sustain its contemporary position in international markets taking different steps and for this purpose, it has to do analysis time and again in order to assess whether the implemented competitive strategy is compatible with current business environment or not. Following are some recommendations which can be used by Virgin Atlantics for sustaining its current position.
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Constant analysis:
Virgin Atlantics should do constant internal and external analysis and amend the strategy or develop change management strategy according to the market requirements so that it can gain competitive advantages and beat its potential competitors. Additionally, these analyses would also enable the company to assess strengths and weaknesses of the company itself and through overpowering these shortcomings; it can develop its competitive strategic plan.
Hybrid strategy:
Though differentiation strategy is ample lucrative for providing sophisticated services and gaining customer loyalty yet it cannot be determined easily. Moreover, it might give high market share but market growth is possible only if this strategy is amalgamated with some additional strategy. This strategy can be cost-leadership strategy or focus strategy. Through focusing on differentiation strategy, Virgin Atlantics can obtain not only high market share but also market growth as well. as far as cost leadership strategy is concerned, it can be amalgamated with differentiation strategy in order to double the profit ratio since different researchers have provided combined competitive strategies as the solution of dynamic situation. (Marti, pp.100, 2007) Nevertheless, this hybrid strategy might also affect in a negative way.
Competitive prices:
Customers usually prefer exceptional services in affordable prices. So, Virgin Atlantics can gain advantages from cheap prices as well. Through providing low cost fleets to different customers, other then the facilitated, this organization could double its profit. However, the budget can be maintained through minimizing provided services during the flights. This thing would enable this organization to have market growth with low price strategy as well.
Value added services:
Value added services are often referred to as secondary services which are used for attracting customers and sustaining their loyalty with organization (Thurau and Hansen, p.112, 2000) No one can deny the significance of Value added services and marketing and this is the reason why it has remained inseparable part of every marketing plan and differentiation strategy. (Singh, pp.22, 2012) Virgin Atlantics can also gain competitive advantages via value added marketing and for this purpose; it can facilitate its customers with value holiday packages, discounted tickets and packages, lottery system and so on. These techniques would also attract a lot of customers and augment profitability and market share of the company as well.
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Conclusion:
To conclude, it can be stated that this organization has been cherishing top positions on international level only because of using differentiation strategy and for this purpose, it has also invested capital through having partnership with Singapore airline. All its services including multiple destinations, holiday services, cargo services and in-flight entertainment, demonstrate its successful usage of differentiation strategy.
However, Virgin Atlantics should also keep the advantages and limitations of using this strategy since there are certain times when this strategy needs slight amendments or changes in order to deal with contemporary circumstances. Virgin Atlantics can use different change management strategies in order to cope with limitations of this competitive strategy.
In addition, this organization can also double its profit through taking different steps including value added marketing, competitive pricing and hybrid strategic development. These add-ons can maximize its profitability as well as worldwide recognitions and ultimately it would be able to compete with potential organizations like Emirates and Gulf Air.
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