The PESTEL Analysis of Virgin Blue Airlines - Example

PESTEL Analysis The PESTEL analysis of Virgin Blue Airlines will help to explain how these factors have being included in the marketing strategies. It will also throw light on the effectiveness of the marketing concepts and theories that has helped Virgin Blue Airlines. The analysis is Political The marketing and service strategy of Virgin Blue Airlines gets affected by the political conditions prevalent in different countries where it is operation. Virgin Blue Airlines was affected by terrorism. This made less people look towards this mode of transport thereby affecting the stability. Stability of the government has a role as changing government makes it difficult to implement policies which makes it difficult for the low cost provider to function Changing tax nature also has a role as rising taxes makes it difficult to cope with the incremental expense Economic The strategy also gets affected by the economic condition prevalent throughout in the following “Slowdown in an economy” (Mullins, 2004) like the recent global recession has affected the sales to fall. Despite the company looking for different marketing strategies the sales are not rising. Virgin Blue Airlines performance also got affected “due to consumer confidence in the economy as the started to believe that it will take time for the economy to come out of sluggishness”. (Mullins, 2004) This affected the overall growth trajectory The growth also hampered and strategies rendered useless due to barriers of entry into the different economies. This affected the strategic thinking process and entering into different markets became difficult. Rise in operating cost and inflation further took a tool as consumers preferred other cheaper mode of transport. Social Virgin Blue Airlines strategies also get affected due to the social culture. This makes the company use different marketing concepts and theories in different countries like “Change in the buying habit of consumer” (Mullins, 2004) has increased the people travelling by air as they want life to be fast Change in generation as Y generation prefers cheaper and faster mode of transport (Mullins, 2004) has brought a change in the way Virgin Blue Airlines used to function Change in the demographic is further adding to it as people are looking towards cheaper and faster mode of communication. Technological The change in technology has enabled Virgin Blue Airlines to bring about a change in marketing theories used previously and now as The changes in the manner services are rendered on board have gone a rapid change (Mullins, 2004) thereby making more people use it. This has also changed the buyer behaviour towards it Internet has helped them in a big way as it has ensured that tickets and all information are available and with fleets getting bigger it has further added to the advantage Environmental The changes in environment has led to Virgin Blue Airlines change the concepts it was using before as The changes in climate due to global warming have increased the role of Virgin Blue Airlines towards the society by ensuring that pollution level falls. (Mullins, 2004) This has made the concepts and marketing theories to undergo change and look more into the social responsibility aspect Legal This also brought about a change in which Virgin Blue Airlines performed as it changed the concepts like Workers threatening to go on strike as being paid poorly (Mullins, 2004) is making Virgin Blue Airlines look for alternatives to ensure equality for all. Virgin Blue Airlines by ensuring sufficient safety facilities for passengers and crew members are looking towards adhering to the legal requirements SWOT Analysis The analysis of SWOT will help to identify how Virgin Blue Airlines based on its strengths and weakness was able to use the different marketing concepts and the result it yielded for the company. The SWOT is as follows Industry Analysis This analysis will help to understand the manner in which the company is performing History Virgin Blue airlines have been in operation since 2000 and with the passage of time it has transformed itself into a cost leader. The company intends to pursue a different strategy by positioning it in between the leisure and business class. For this the company has brought about changes which will help to distinguish it from its competitor. To achieve it Virgin Blue has pursued an aggressive marketing policy. The company has come up with different features to attract customers especially from the business sector. For the leisure sector the company awards reward programs so that it can retain its customers. The company faces competition from various airlines and one such is Jet Star performing in a similar segment. Market Overview The airline industry is on an upswing. This sector has grown due to contribution from all sectors. This is bound to move up and the new initiatives and development will further give a push. The airline industry had US$12,218.2 million revenue in 2009, employing more than 26.160 people. The growth rate has been substantial over the years. “The overall airline industry has shown a dip by 1.2% due to global recession”. This is better compared to other economies. This is bound to take a U turn as the economies are recovering. The promotional campaign will further act as a boost. Data Analysis Comparison of Virgin with the competitors shows contrasting effects. It is seen that Qantas airways have equal number of passengers compared to Virgin. Jet Star falls behind but is slowing catching up. It is seen that Qantas stands at 17.105 compared to Virgin which stands at 16.668 which is much high compared to Jet Star which stands at 7.596 When we look at the revenues generated Qantas stands ahead because Virgin is a low cost provider. Still, the growth shown is impeccable. The overall strategy of Virgin matches with those of the competitors but special care and attention need to be made to cut down cost. It is also seen that the profits of Jet Star which stands at (80.1) is same as Virgin which stands at (97.7) signifying high costs involved for Virgin Airlines. This calls for immediate strategy to ensure that the cost falls and Virgin Blue Airlines is able to grow and capture a larger chunk of the market. Mission Statement “Improve the quality of service and devise mechanism to retain customers so that customer satisfaction remains high and they get value for money” Values Statement “Innovate, cost leadership, differentiator, improve efficiency, quality service, reliability through continuous efforts of the employees for maximum customer satisfaction” Strategic Objective The strategic objectives which are of prime importance for Virgin Blue are Positioning the airlines as a differentiator and cost leader Using this strategy will help Virgin Blue Airlines to be able to identify its customers properly and devise a mechanism through which it can tap those. The company with a change in its outlook is looking to position its product “in between the leisure customers who are price conscious and the business class who want facilities even at a higher price”. (Treacher & Pollard, 2004) They are trying to position themselves ‘in between the price leader and differentiator but ensuring that they don’t take any side”. (Treacher & Pollard, 2004) This will help them eye a lot of customers in different segment. The strategy of positioning has been such that it is both for the business and economy class. The positioning strategy will also reflecting the strategy the company seems to pursue to project itself as a cost leader and differentiator. Marketing Strategy to attract more customers and retain the old ones Virgin Blue needs to differentiate itself by offering better service. With an aim to eye the business class necessary changes has to make around. The company has to keep the first few rows for them. These rows should have more leg space; the luggage allowance should be more; the middle seats to be have been done away with and are given access to lounges has to be provided. This when mixed with the low cost being offered to business class more compared to the competitors? This will help Virgin Blue to make easy entry into this segment and differentiate itself. To eye the business sector Virgin Blue should offer “Corporate Plus fare where new incentives like access to lounge, baggage up to 32 kg and priority check in”. (George, 2006) This will work well as business class will get more facilities at a lower price compared to other competitors at the same time make their journey memorable. Virgin blue should develop “partnership with online retailers so that consumers have more easy access to the airlines facility”. (Kelly, 2005) This will help the airlines to promote its name with different brand and making customers to associate with the airlines easily. This will ensure that Virgin Blue instead of “relying on the traditional methods takes advantage of technology” (Kelly, 2005) to promote itself. This will also help the company to enter into new markets with different brand association thereby making it easy for them to expand. Ways to reduce cost and improve efficiency so that the slogan of the company goes with the pleasure people experience Virgin Blue has to differentiate itself as a cost leader. The company has to “develop internal branding in areas which it has no relation thereby ensuring that the company gets the best talent”. (Verma, 2006) This will enable Virgin Blue to get the best talent at the lowest cost. The company on the other hand should ensure that that they don’t use printed tickets; the meals provided in the flight are been done away with, operate a single type of flight and make use of the facilities of the airport on a competitive agreement. This in addition to offering loyalty programs like “velocity for frequent traveller who will get a free life membership card where they can accumulate points of their travel journey and can be redeemed all the year round”. (Gunter, 2007) This will help Virgin Blue retain its old customers as they can get additional benefit apart from flying. Key Objectives This are important areas for which will highlight the area the company needs to work on so that the strategic objective of the company is achieved. Pricing Strategy by ensuring that the prices are low and earn new as well a retain old customers Virgin Blue should follow “just in time technology where customers get tickets at a lower rate if it is booked in advance as compared to the date nearing the journey”. (Colley, 2001) This strategy is followed by cost leader. This strategy will help Virgin Blue capture a good market and with technology advancement and penetration of internet it will become a very good option. When compared to the competitor the company needs to price its tickets “at rates lower to other airlines and at the same time gives huge discounts thereby intensifying competition”. (Tansy, 2004) Consumers who are frequent should get it at a lower rate thereby giving them additional benefits. Identify the target market properly and ensure marketing strategies to attract those The company should eye two sectors. Firstly, “the leisure segment where people are price elastic”. (Bamber, 2006) The company will do well in this segment by “offering very low prices compared to its competitor”. (Bamber, 2006) Second, “the business sector which provides higher revenue by having additional facilities as this segment prefers quality over price”. (Bamber, 2006) Virgin Blue should ensure that it devises its strategy such that it eyes both the segment so that it can expand its reach in different markets. Providing travel packages and different services Virgin Blue Airlines should design packages which cover different travel destination keeping in mind both the business and the economy passengers so that travel becomes cheap. This can be strengthened by ensuring that packages are designed for tourist as well as business destination. To ensure successful delivery of these services Virgin Blue Airlines needs to tie up with different travel agents and hotels to ensure that people get extra if they travel via Virgin Blue Airlines. References Bamber, 2006, “Market analysis of Jet Star and Virgin Blue Airlines”, Business Category, OPPaper.com, page 6 George T, (2006), “New Corporate Plus Fare Delivers Significant Cost Savings to Corporate”, News & Press Release, Virgin Blue Airlines Pty Ltd Gunter P, (2007), “Virgin Blue Velocity Program”, Airline Business Media Partner, Edition 7 Kelly M, (2005), “Virgin sleeps around seeks new partner”, Travel trends, Travel Tech, Blue Water Press Mullins K, 2004, “Critically examine the main drivers for Virgin Blue Airlines growth”, Free Press, New York Treacher K & Pollard J, (2004), “Does Virgin Deliver on Promise”, Marketing Strategies, B & T Today Verma M, (2006), “Internal Branding & HRM at Virgin”, Internet & e-commerce, OB Case study code HRM0047P Read More