Virgin Australia (VAH) SWOT Analysis / TOWS Matrix / MBA Resources
Airline
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Virgin Australia (Australia)
Based on various researches at Oak Spring University , Virgin Australia is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, there is backlash against globalization,
challanges to central banks by blockchain based private currencies, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Virgin Australia can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Virgin Australia, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Virgin Australia 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 Australia can be done for the following purposes –
1. Strategic planning of Virgin Australia
2. Improving business portfolio management of Virgin Australia
3. Assessing feasibility of the new initiative in Australia
4. Making a Airline sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Virgin Australia
Strengths of Virgin Australia | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Virgin Australia are -
Training and development
– Virgin Australia has one of the best training and development program in Transportation industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Ability to lead change in Airline
– Virgin Australia is one of the leading players in the Airline industry in Australia. Over the years it has not only transformed the business landscape in the Airline industry in Australia but also across the existing markets. The ability to lead change has enabled Virgin Australia 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 Australia is one of the leading players in the Airline industry in Australia. It is in a position to attract the best talent available in Australia. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Airline industry
– Virgin Australia has clearly differentiated products in the market place. This has enabled Virgin Australia to fetch slight price premium compare to the competitors in the Airline industry. The sustainable margins have also helped Virgin Australia to invest into research and development (R&D) and innovation.
Analytics focus
– Virgin Australia is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Airline industry. The technology infrastructure of Australia is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Learning organization
- Virgin Australia 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 Australia is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Virgin Australia emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Virgin Australia is present in almost all the verticals within the Airline industry. This has provided Virgin Australia 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 of Virgin Australia comprises – understanding the underlying the factors in the Airline 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.
Digital Transformation in Airline industry
- digital transformation varies from industry to industry. For Virgin Australia digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Virgin Australia 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.
Effective Research and Development (R&D)
– Virgin Australia has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Virgin Australia staying ahead in the Airline industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management in the Airline industry
– Virgin Australia is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Virgin Australia is one of the most innovative firm in Airline sector.
Weaknesses of Virgin Australia | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Virgin Australia are -
Ability to respond to the competition
– As the decision making is very deliberative at Virgin Australia, in the dynamic environment of Airline industry it has struggled to respond to the nimble upstart competition. Virgin Australia 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 Australia has a high cash cycle compare to other players in the Airline industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Virgin Australia is slow explore the new channels of communication. These new channels of communication can help Virgin Australia to provide better information regarding Airline products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, Virgin Australia 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 Airline industry using digital technology.
High bargaining power of channel partners in Airline industry
– because of the regulatory requirements in Australia, Virgin Australia 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 Airline industry.
Need for greater diversity
– Virgin Australia has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High operating costs
– Compare to the competitors, Virgin Australia has high operating costs in the Airline industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Virgin Australia lucrative customers.
Skills based hiring in Airline industry
– The stress on hiring functional specialists at Virgin Australia has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High dependence on Virgin Australia ‘s star products
– The top 2 products and services of Virgin Australia still accounts for major business revenue. This dependence on star products in Airline industry has resulted into insufficient focus on developing new products, even though Virgin Australia has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Virgin Australia has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Workers concerns about automation
– As automation is fast increasing in the Airline industry, Virgin Australia 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.
Virgin Australia Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Virgin Australia are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Virgin Australia can use these opportunities to build new business models that can help the communities that Virgin Australia operates in. Secondly it can use opportunities from government spending in Airline sector.
Learning at scale
– Online learning technologies has now opened space for Virgin Australia 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.
Using analytics as competitive advantage
– Virgin Australia has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Airline sector. This continuous investment in analytics has enabled Virgin Australia to build a competitive advantage using analytics. The analytics driven competitive advantage can help Virgin Australia to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Airline industry, but it has also influenced the consumer preferences. Virgin Australia can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Virgin Australia 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.
Loyalty marketing
– Virgin Australia 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.
Building a culture of innovation
– managers at Virgin Australia 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 Airline industry.
Buying journey improvements
– Virgin Australia can improve the customer journey of consumers in the Airline industry by using analytics and artificial intelligence. It 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Virgin Australia 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 Australia to hire the very best people irrespective of their geographical location.
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 Australia can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Airline industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Virgin Australia 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 Australia 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.
Leveraging digital technologies
– Virgin Australia can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Virgin Australia 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 Virgin Australia to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Virgin Australia External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Virgin Australia 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Virgin Australia may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Airline sector.
Increasing wage structure of Virgin Australia
– 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 Australia.
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 Australia in the Airline sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Airline industry are lowering. It can presents Virgin Australia with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Airline sector.
Regulatory challenges
– Virgin Australia needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Airline industry regulations.
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 Australia.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Virgin Australia 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 Virgin Australia prominent markets.
Easy access to finance
– Easy access to finance in Airline industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Virgin Australia can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Australia business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Virgin Australia 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 Australia can take advantage of this fund but it will also bring new competitors in the Airline industry.
High dependence on third party suppliers
– Virgin Australia high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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.
Weighted SWOT Analysis of Virgin Australia Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Virgin Australia 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 Virgin Australia 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 Virgin Australia 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 Australia 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 Australia needs to make to build a sustainable competitive advantage.
