Business Strategy and Plan for
Virgin Media Inc. is one of the world’s leading entertainment and telecommunications business catering to the consumer and business sectors . Virgin Media has listings on the NASDAQ in the US and London Stock exchange or LSE in the UK VMED as its ticker . Virgin laptops are supplied to the UK market under the umbrella of Virgin Mobile. This analysis evaluates the current standing of Virgin laptops, the market environment that it operates in, its future prospects as well as providing recommendations.
Johnson, Whittington & Scholes (2009:56) state that the PESTEL analysis is crucial for business environment analysis as the political, economical, social, technological, environmental and legal factors have a great impact on the success of the Virgin laptops with windows eight (8)’ in the UK. The PESTEL analysis for the UK market of Virgin laptops is given below:
- Political and legal: There has been a growing concern among government and non-government organizations or NGOs over the environmental implications of the operations of technological companies. As a result, numerous environment protection regulations relevant to the IT and Telecommunications industry have been created including the Waste Electrical and Electronic Equipment or WEEE, and the Restriction of Hazardous Substances or RoHS directives (Dalal 2009). Further, manufacturing costs rise as a result of certification and testing that impact the production and supply of personal computers, thereby reducing the profits (Dalal 2009). Except for these concerns, the UK market is fairly stable as far as the political and legal scenario is concerned.
- Economic factors: Although VAT has risen from 17.5% to 20% to cope with budget deficits leading to heightened corporate expenditure, a rise in minimum wages up to 15.5% is expected to have a positive impact on demand (HM Revenue and Customs 2011). It is expected that this will eventually lead to a gradual rise in market share from 5.4% in 2009 to 4.4% in 2012 (Gartner 2008).
- Social: Education level, net income and consumer preferences play a major role in the demand for laptops in UK. The UK consumer market is highly educated and hence, it is common for people to use laptops. For example, demand for laptops in the UK increases during festive seasons as consumers tend to spend more during this time (Gartner 2009).
- Technological: With a mature consumer market and constantly evolving technology, the UK market is ripe for hi-tech products such as laptops.
The Strength, Weaknesses, Opportunities and Threats or SWOT analysis is mostly utilized to evaluate the aptness of a product for a chosen market, applicable to new and existing products within exiting or fresh markets. The analysis also enables a company to analyse steps that can be taken to ensure the continued success of a product (Johnson, Whittington & Scholes 2009:119). Given below is the SWOT analysis of Virgin laptops for the UK market:
- Strengths: With consumer preferences shifting towards slimmer, high speed ultra-books, Virgin’s 3.1 pound, light weight laptops that are less than 18mm in thickness, with small processors, flash storage drive, 5 hour battery life and integrates the Rapid Start technology by Intel will be a major strength (Pinegar 2002).
- Weaknesses: Although the flagship Virgin Mobile and Virgin Media are forces to reckon with in the UK market, their laptop segment still has to build a brand image and loyal consumer base, which is cause for concern.
- Opportunities: Virgin laptops can capitalize on the massive goodwill that Virgin Mobile holds among consumers and use this aspect in the marketing of their products. The IT sector in the UK had continued to grow even during the economic recession of 2009 (Gartner 2009) and the exceptional growth is expected for Virgin Media .
- Threats: The UK PC market is already dominated by five key competitors, namely: i) Dell, ii) Hewlett-Packard or HP, iii) Gateway, iv) Lenovo/IBM, and v) Apple Computers, who command over 64.2% of the total market share (Davis 2009).
Michael Porter’s Five Forces model has been extensively used by businesses and economists to evaluate the level of competition in a given market. Given below is the Five Forces analysis for Virgin laptops in the UK market:
- Threats of new entrants: High distribution and production costs make conditions tough for new entrants in the UK PC market (Johnson, Whittington & Scholes 2010). Five existing major competitors control a vast majority of the market share (Davis 2009). As a result, new entrants have to rely on low pricing in order to survive and compete in the market (Kotler 2009).
- Threat of substitute products: The advent of PC tablets and smart phones has given consumers alternative products to choose from, thereby reducing demand for laptops that need to differentiate themselves and constantly create USPs (Davis 2009). Technological development being rapid and easily available, major players have products with similar features and characteristics which makes differentiation even tougher (Dalal 2009).
- The Bargaining power of buyers: High brand equity and a consumer base that has tremendous knowledge of product features and availability increases the bargaining power of buyers, leaving sellers with fewer factors to leverage (Dalal 2009).
- The Bargaining power of suppliers: With Intel commanding over 50% of the micro-processor market, and consumers demanding consistency and compatibility of software, it becomes imperative for companies to use steady supplier, which leads to high bargaining power of suppliers (Kaplan & Anderson 2007).
- Intensity of rivalry: A vast majority, over 64%, of the UK laptop market is dominated by 5 major players that do not include Virgin laptops. This makes competition very fierce (Kaplan & Anderson 2007).
Figure 1: Porter’s Five Forces Analysis of Virgin laptops for the UK Market
A typical product lifecycle consists of five main stages, which are: i) Development, ii) Introduction, iii) Growth, iv) Maturity, and v) Decline.
Figure 2: Product Life Cycle
Based on the traditional product cycle, it can ne concluded that Virgin Laptop’s Ultra-laptops, its current range of products, is in the introduction phase. However, by capitalizing on brand equity and intense advertising to drive sales, the product can be expected to reach the maturity phase in 3 years.
In order to make a mark in the laptop market, Virgin Laptops will need to rely on the goodwill generated by Virgin Media and Virgin Mobile to promote their products as being superior to those of competitors (Pickton & Broderick 2005:427).
Through the introduction of its latest range of laptops, Virgin mobile has set the following goals : i) Short term: brand awareness to be increased by 10%, which should lead to a 5% market share between 2012 and 2013, ii) Medium term: A 20% increase in customer satisfaction by 2014 through product development and surveys, and iii) Long term: Attain a 6.5% growth in sales by 2014-2015 by promoting products in the European market.
As consumers become increasingly IT savvy and computer literate, high end laptops with state of the art features are rising in demand. However, Virgin laptops will need to introduce new products cautiously, launching pilots first and then increasing production based on consumer response. The focus should be on university students and young professionals who have sufficient income at their disposal to make purchases.
Strategic positioning revolves around competitive initial pricing of products in order to cope with market and competition challenges (Kotler, Keller, Brady, Goodman & Hansen 2009:853). Virgin laptops should focus on differentiating its products by promoting its competitive pricing and added high-tech tech features when compared to similar products being sold by rivals.
Research has shown that, after witnessing a fall during 2008, the demand for laptops is steadily rising (Garoia 2010). Virgin Laptop will need to categorize its focus target audiences to be able to design its marketing and advertizing around them. With a target base of university students and young professionals, these should be given separate attention as the needs and preferences, as well as their consumption behavior will be different.
Based on the fact that Virgin Laptops will be focusing on promoting is new ultra-laptop range, it would be placed in the product development quadrant of the Ansoff Matrix. Consumers are most likely to positively respond to the product considering the intrinsic value being delivered as well as the ethical reputation of Virgin Mobile and Virgin Media (Emerald 2003). Sales can be expected to grow through rigorous marketing, sales, advertising and promotional campaigns to build brand awareness. While the company should focus on differentiating their products, any form of diversification should be put on hold till the ultra-laptop range reaches its maturity stage in the product life cycle.
Figure 3: Ansoff Matrix of Virgin Laptops for the UK Market
Existing Product New Product
Existing Market
New
Market
Kotler explains that a company’s distribution strategy revolves around the establishment and managing of channel partners to effectively add value for consumers (Kotler et al 2009:853). Virgin Laptop’s website and the ‘at you service’, a toll free customer support desk, and third party retail distributors such as Target for the company’s direct distribution network. The product will also be sold through a fourth-party distributor – Amazon.com (Lynch 2008).
Price penetration strategy will be employed with an estimated average price pegged at £550 and £6500 prices respectively. An estimation of£400 and £450 has been marked as the average variable cost. The fixed cost of production estimated for Virgin’s Ultra-Laptops is between £5,000,000 and £6,000,000, bringing the total up to £11,000,000. It is predicted that the range will break even and begin to bring in profits from year 2 of their launch, with sales revenue reaching £3,000,000.
Control measures are crucial for the achievement of set objectives for any organization. It is therefore important to have a system of checks and balances and good communication channel to track and monitor activities.
There should be clear distinction of the roles each department plays and also a coordination of amongst different departments to help develop products. Surveys and feasibility studies will be conducted quarterly to determine levels of customer satisfaction to ascertain the level of acceptability of the product.
As part of demonstrating our commitment to our communities of operation, our slogan for our CSR will be “community, our business”. This company shall take initiatives as distributing laptops to underprivileged schools within the UK and ensuring that students are given tuition through our “teachers for all initiative”.
It is important for virgin mobile under the bigger umbrella of virgin group to use its well-recognised and respected brand image within the UK and beyond to market virgin range of laptops. The brand equity virgin group enjoys in the UK will enhance penetration of virgin range of laptops into the UK market.
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