Supplement to case B5828. This case illustrates how Virgin America, founded in 2007, craved a niche of dedicated urbanite-flyers in the highly competitive -- but staid -- airline industry by redefining the passenger flying experience. In 2012, approximately 20 percent of Virgin America's passengers accounted for 80 percent of the airline's revenue. The A case begins with Virgin America's launch in August 2007, when the airline began with transcontinental flights between New York City and Los Angeles and San Francisco, and then goes through August 2012, after the airline had expanded into 19 market destinations across the United States and Mexico but was still unprofitable. In the A case, the dynamics of the airline industry, customer experience and loyalty, and niche marketing are explored. The A case ends with several questions, including those asking students to evaluate Virgin America's business model and to identify the action steps needed to reach profitability. The B case then covers Virgin America during 2013 and the decisions Cush and his management team made to make the airline profitable that year, an important financial milestone prior to any possible IPO. The C case concludes with Virgin America's successful IPO in November 2014. Please note: this case has an additional supplementary case available. The (C) supplement can be found using product number B5830.
Swot Analysis of "Virgin America (B)" written by Adam Berman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Virgin Airline facing as an external strategic factors. Some of the topics covered in Virgin America (B) case study are - Strategic Management Strategies, Entrepreneurship, Leadership, Managing people, Marketing, Organizational culture, Risk management and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Virgin America (B) casestudy better are - – supply chains are disrupted by pandemic , increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, geopolitical disruptions, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs,
wage bills are increasing, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Virgin America (B)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Virgin America (B) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Virgin Airline, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Virgin Airline operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Virgin America (B) can be done for the following purposes –
1. Strategic planning using facts provided in Virgin America (B) case study
2. Improving business portfolio management of Virgin Airline
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Virgin Airline
Strengths Virgin America (B) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Virgin Airline in Virgin America (B) Harvard Business Review case study are -
Ability to lead change in Innovation & Entrepreneurship field
– Virgin Airline is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Virgin Airline in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Virgin Airline is one of the leading recruiters in the industry. Managers in the Virgin America (B) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Virgin America (B) firm has clearly differentiated products in the market place. This has enabled Virgin Airline to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Virgin Airline to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Virgin Airline in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Virgin Airline has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Virgin Airline has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
High brand equity
– Virgin Airline has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Virgin Airline to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Virgin Airline is present in almost all the verticals within the industry. This has provided firm in Virgin America (B) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Operational resilience
– The operational resilience strategy in the Virgin America (B) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Cross disciplinary teams
– Horizontal connected teams at the Virgin Airline are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Virgin Airline digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Virgin Airline has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Low bargaining power of suppliers
– Suppliers of Virgin Airline in the sector have low bargaining power. Virgin America (B) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Virgin Airline to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Virgin Airline is one of the most innovative firm in sector. Manager in Virgin America (B) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Virgin America (B) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Virgin America (B) are -
Slow to strategic competitive environment developments
– As Virgin America (B) HBR case study mentions - Virgin Airline takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Virgin America (B) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Virgin Airline has relatively successful track record of launching new products.
No frontier risks strategy
– After analyzing the HBR case study Virgin America (B), it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Low market penetration in new markets
– Outside its home market of Virgin Airline, firm in the HBR case study Virgin America (B) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Virgin America (B), is just above the industry average. Virgin Airline needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High bargaining power of channel partners
– Because of the regulatory requirements, Adam Berman suggests that, Virgin Airline is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Virgin America (B), in the dynamic environment Virgin Airline has struggled to respond to the nimble upstart competition. Virgin Airline has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Virgin Airline has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Virgin Airline supply chain. Even after few cautionary changes mentioned in the HBR case study - Virgin America (B), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Virgin Airline vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the segment, Virgin Airline needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High cash cycle compare to competitors
Virgin Airline has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Opportunities Virgin America (B) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Virgin America (B) are -
Buying journey improvements
– Virgin Airline can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Virgin America (B) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Better consumer reach
– The expansion of the 5G network will help Virgin Airline to increase its market reach. Virgin Airline will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Virgin Airline can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Virgin America (B), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Virgin Airline can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Virgin Airline can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Manufacturing automation
– Virgin Airline can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Learning at scale
– Online learning technologies has now opened space for Virgin Airline to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Virgin Airline is facing challenges because of the dominance of functional experts in the organization. Virgin America (B) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Building a culture of innovation
– managers at Virgin Airline can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Innovation & Entrepreneurship segment.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Virgin Airline to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Virgin Airline to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Virgin Airline can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Virgin Airline in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Virgin Airline in the consumer business. Now Virgin Airline can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Virgin America (B) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Virgin America (B) are -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Virgin Airline business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Virgin Airline with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Virgin Airline will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Virgin Airline can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Virgin America (B) .
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Virgin America (B), Virgin Airline may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
Shortening product life cycle
– it is one of the major threat that Virgin Airline is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Virgin Airline.
Increasing wage structure of Virgin Airline
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Virgin Airline.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Virgin Airline can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Virgin Airline in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Environmental challenges
– Virgin Airline needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Virgin Airline can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Weighted SWOT Analysis of Virgin America (B) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Virgin America (B) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Virgin America (B) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Virgin America (B) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Virgin America (B) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Virgin Airline needs to make to build a sustainable competitive advantage.
