Introduction
Virgin Australia Holdings Ltd. is a Strategic Business Unit (SBU) of the Virgin group headed by Richard Branson. This company is headquartered at Bowen Hills in Queensland and was founded in the year 2000 (Virgin Australia, 2012). It was formerly known to public by the name of Virgin Blue Airlines and is the second-largest airline service in Australia by fleet size.
The company’s CEO John Borghetti announced the Game Change program in May 2011, with the purpose of repositioning the airline as the primary choice of the Australian customers. The first ever flight of Virgin Australia Holdings took off from Brisbane to Sydney in August in 2000. Virgin Australia Holdings Ltd. launched 14 new routes by the second half of the year 2001.
Virgin Blue announced in 2003 that the solely owned subsidiary Pacific Blue would fly low-cost between Australia and New Zealand. Pacific Blue intended to position itself as a cheaper competitor to Qantas and Air New Zealand on trans-Tasman routes (Virgin Australia, 2012).
Virgin Australia Holdings Ltd.’s frequent flyer program Velocity Rewards bagged the 2009 Freddie Awards that is considered as the largest award in the travel industry (IBIS World, 2013).
2. Strategic Business Unit (SBU)
Virgin Group came into existence in the year 1970. Virgin is amongst the top competitive companies who provide several services such as mobile telephony, media, and music, travel, and flight services all round the world. It has more than 300 branded companies worldwide, as well as nearly 50 thousand employees in over 30 countries. Virgin Australia Holdings part of the Virgin Group. They cater into the flights and travel services industry. Most services provided for international, domestic, tourism. The international airline services might be an opportunity for Virgin Australia to be an essential competitor in the international market, as well as increasing the company profits (Farabi, 2012). The table shows SBU for Virgin Australia and the next competitor Qantas Airways Ltd, the market share for each, and the growth rate.
3. Situation Analysis
a. Internal Environment – The selected Strategic Business Unit (SBU) for Virgin Australia Holdings Ltd. is the International Airline Industry. The relevant marketing mix (The Chartered Institute of Marketing, 2009) or 4P’s analysis of the selected SBU would be as follows:
- Product- The airline industry is critical to Australia’s ongoing economic and social development whether disbursing tourists, freight or business travellers. Australia’s modern aviation industry supports thousands of jobs.
- Price - There is no question that the international airline industry and in-country services to a smaller extent are experiencing a sluggish customer demand. But, the situation is not as bad in Australia than in other areas of the world. The bigger players of the industry are still striving for more market share. There is likelihood of a price war with the major players like Qantas Airways and Virgin Australia who would not wait and watch and let market share go away (Farabi, 2012).
- Place - The airlines industry has the opportunity to tap the local wealth of individuals. The main airline companies of Australia i.e. Qantas Airways and Virgin Australia still hold most of the domestic and international travel market. Even the many attempts by the minor players their position is not going to change in the short run.
- Promotion - The fact that the world economy is still in a state of slowdown seems to have no major influence on the local air travel in Australia.
b. External Environment
- Markets- As a result of the reforms, Australia’s domestic market now has huge potentialities and a very strong competition exists in its local aviation market. Thereby, air services are now available on major routes and are being catered by mainly 3-4 airline companies all providing competitive fares and differing services.
- Competitive environment- Australian airlines are in a better financial position as regards to the International airline companies and are competitively placed to cope with fluctuating fuel costs and recurring passenger and freight demands.
- Economic environment- The economic policy is based on the premise that if Australia wants two competing airlines in the domestic market, some authority had to regulate them. This was mainly to make sure that these airlines were safeguarded their market shares so that each could remain commercially competitive over the long term (Prideaux &Whyte, 2013).
- Demographic environment- There has been a decline on other regional and more remote routes. Regional intra-state air services are primarily a state and territory responsibility in Australia (Australian Aviation Industry, 2012).
- Social and Cultural environment- Since the Australian economy has not had much impact of the global meltdown and recession that could be witnessed in the airlines sector, most of the airlines are serving almost to all of the population (Fojt, 2006).
- Political and Legal environment- The deregulation of the Australian domestic aviation industry in 1990, paved the way for the Trade Practices Act, 1994 and state consumer laws were enforced upon. There is broad support for the current arrangements to continue, and unnecessary costs being passed on to all consumers would be prevented (Parliament of Australia, 2003).
- Technological environment – Australia recognizes the need for investment in newer air navigation facilities. This includes modern satellite technology and aviation safety to cope with future air traffic demands (IBIS World, 2013).
c. SWOT Analysis- The following is a SWOT analysis of Virgin Australia Holdings Ltd. presented in a matrix diagram:
References
Australian Aviation Industry, 2012. Employee Engagement Survey. Available at: < http://www.alaea.asn.au/Aviation_Survey_2012.pdf> [Accessed on 20 August 2013].
Farabi, Y., 2012. Analysis of Market Environment of Virgin Australia. GRIN Verlag.
Fojt, M., 2006. Strategic Direction: The Airline Industry. Emerald Group Publishing Ltd.
IBIS World, 2013. Virgin Australia Holdings Limited - Premium Company Report Australia. Available at: < http://www.ibisworld.com.au/car/default.aspx?entid=8879>. [Accessed on 20 August 2013].
Parliament of Australia, 2003. Australian Airline Industry. Available at:< http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp0203/03RP10#dthe>. [Accessed on 20 August 2013].
Prideaux, B., Whyte, R., 2013. Implications for Destinations when Low-Cost Carrier Operations are Disrupted: The Case of Tiger Airlines Australia, in Joseph S. Chen (ed.) Advances in Hospitality and Leisure Vol 9, pp. 99-118. Emerald Group Publishing Limited.
The Chartered Institute of Marketing, 2009. Marketing and the 7 P’s: A brief summary of marketing and how it works. Available at: < http://www.cim.co.uk/files/7ps.pdf>. [Accessed on 20 August 2013].
Virgin Australia, 2012. Virgin Australia History. Available at: <http://www.virginaustralia.com/au/en/about-us/company-overview/virgin-australia-history/>. [Accessed on 20 August 2013].
