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 also has two supplementary cases available. The (B) and (C) supplements can be found using product numbers B5829 and B5830.
Swot Analysis of "Virgin America (A)" written by Adam Berman, Frank C. Schultz 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 (A) 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 (A) casestudy better are - – there is backlash against globalization, technology disruption, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China,
customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Virgin America (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Virgin America (A) 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 (A) can be done for the following purposes –
1. Strategic planning using facts provided in Virgin America (A) 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 (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Virgin Airline in Virgin America (A) Harvard Business Review case study are -
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.
Learning organization
- Virgin Airline is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Virgin Airline is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Virgin America (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Virgin Airline is one of the leading recruiters in the industry. Managers in the Virgin America (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Innovation driven organization
– Virgin Airline is one of the most innovative firm in sector. Manager in Virgin America (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Highly skilled collaborators
– Virgin Airline has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Virgin America (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
High switching costs
– The high switching costs that Virgin Airline has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Effective Research and Development (R&D)
– Virgin Airline has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Virgin America (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Virgin America (A) 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.
Organizational Resilience of Virgin Airline
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Virgin Airline does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Virgin America (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Virgin America (A) are -
Slow to strategic competitive environment developments
– As Virgin America (A) 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 operating costs
– Compare to the competitors, firm in the HBR case study Virgin America (A) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Virgin Airline 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Virgin Airline, firm in the HBR case study Virgin America (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Virgin Airline is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Virgin Airline needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Virgin Airline to focus more on services rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Virgin Airline has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Virgin Airline even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Virgin America (A), 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.
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.
No frontier risks strategy
– After analyzing the HBR case study Virgin America (A), 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.
Lack of clear differentiation of Virgin Airline products
– To increase the profitability and margins on the products, Virgin Airline needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, Adam Berman, Frank C. Schultz 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.
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.
Opportunities Virgin America (A) | 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 (A) are -
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.
Using analytics as competitive advantage
– Virgin Airline has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Virgin America (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Virgin Airline to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Virgin Airline can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Virgin Airline can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Virgin Airline to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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.
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.
Loyalty marketing
– Virgin Airline has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Virgin Airline can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Buying journey improvements
– Virgin Airline can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Virgin America (A) 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.
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 (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
Threats Virgin America (A) 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 (A) are -
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.
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.
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.
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.
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.
Stagnating economy with rate increase
– Virgin Airline can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Consumer confidence and its impact on Virgin Airline demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
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.
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.
Technology acceleration in Forth Industrial Revolution
– Virgin Airline has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Virgin Airline needs to keep up with the evolution of technology in the Innovation & Entrepreneurship sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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.
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.
Weighted SWOT Analysis of Virgin America (A) 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 (A) 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 (A) 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 (A) 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 (A) 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.
