1A The leadership of the Virgin Atlantic believes that the success of the business strategy requires them to build their foundations by focusing on business and leisure market. Also, by building foundation by focusing on driving efficiency and effectiveness of the company. They have a simple mission statement, which is to embrace the human spirit and to fly. In contrast, the British Red Cross helps people who are in crisis, irrespective who and where they are. In their effort, they form part of a global voluntary network, who responds to “conflicts, natural disasters, and individual emergencies.”
Virgin Atlantic has a sound environmental policy. As an airline, they take the environmental impact of their organization very seriously. As a step in that direction, they realize that they have limited leverage in reducing the overall emission. But, they feel determined to growing their fleet in such a way that is most sustainable. To further their environmental policy, they plan to do by investing in more efficient aircraft and using them in most efficient way.
Further, to meet is legal obligations towards noise reduction; they have complied with a comprehensive regulatory framework across three levels. They support the International Civil Aviation Organization’s (ICAO) position of following the ‘Balanced Approach’. This approach includes reducing aircraft noise at source, proper land-use planning and management, following noise abatement operational procedures, and putting operating restrictions. They also follow the EU and UK regulation. Under the EU regulation, they follow the guidelines under the ‘Directives 2002/30 on the establishment of rules and procedures about the introduction of noise-related operating restrictions at community airports’. The UK regulations, which they are following, include; night flying restrictions, departure noise limits, annual noise contour area limits, annual movement limits, runway use restrictions, aircraft operating restrictions, and ground movement and engine testing restrictions.
Towards the corporate social responsibility, they have formed Virgin Atlantic Foundation a UK based registered charity to support the welfare of children and young people. Next in 2010, they partnered with Free The Children.
IB Between the year 2008 and 2013, many parts of the world along with UK witnessed recession. The manufacturing declined, and unemployment rose. To complicate the things further, double digit recession occurred from the fourth quarter of 2011 till the end of the second quarter of 2012.
In response to challenging times, the Bank of England exercised its control over the monetary policies. It used the policy of quantitative easing in an effort to revive consumer spending and economic growth. In the context of the aviation industry, if the quantitative easing works the way it is expected to, then unemployment rate comes, the demand for air travel goes up, and revenue of airlines increases. If it does not have the desired effect, then resultant increase in fuel prices will be temporary, and air travel is more likely to stabilize than to increase rapidly.
1C Assessing the direct impact of Enterprise Act 2002 of the EU legislation, we found that an idea is to provide equal access to air travel for disable people and also those with reduced mobility. In areas where the CAA does not have statutory duty, it will take steps in favour of a specific group of consumers only when it supports the competition. Also, the direct impact of the interventions by CAA will first be felt by the business, as many aspect of air travel are related business-to-business relationships. For example, any improvement in services provided at the airport should be felt by the consumers and also by the airlines like Virgin Atlantic.
1D In the airlines industry, the price elasticity of demand is categorized into two segments of consumes and is considered to be both elastic and inelastic. For example, the leisure travelers will be impacted in terms of the amount they travel based on the demand increase or decrease. They are also affected by prices that get lowered due to high demand or prices that rise due to low demand. In contrast, for the business traveller experiences inelastic demand, as a result, of the quantity of service demanded and if the quality has not decreased when the prices have risen. Put differently, this business travel is considered to be a necessary tool, which remains unaffected by prices changes within the demand curve.
1E Here we will be conducting the PESTEL analysis of Virgin Atlantic Airways. In this analysis, we will be evaluating its scenario in the context of political, economic, social, and technological aspect. From the political standpoint, though Sir Richard Branson holds the ownership of the brand, the Delta Airlines owns 47% of the airlines. As far as other companies are concerned, he simply licences the other companies, which he has purchased, to use the brand.
Regarding the economic aspect, we will begin with highlighting the strengths. One of the major strengths is the influence, value and legacy of Mr. Branson. Among other advantages is that the business is privately owned, which implies that they can manage the business independently without much restrictions. They have also set good image and good marketing strategy that involves promoting each of the divisions as a part of an alliance. And also they have a strong leadership team who are qualified enough to lead the entire organization.
Next, coming to the social aspect, we will discuss its weaknesses. One of the major one is the low return in cash flow because they offer low prices to the passengers. At the same time they have to bear high expenditure on maintenance of the planes and maintaining quality of service. At the same time there are opportunities for Virgin Airlines. Some of the major airlines have experiences bankruptcy, which offers them a great opportunity. This is especially true when they have European Union by their side.
Lastly, talking about the technological aspects, the rapid growth and change in the global economy forms a threat because of new restrictions. Besides competition and the high cost fuel, are threats from terrorism, issues around over flight restrictions, and new competitions.
1F As a global carrier, they fly to different countries in the world. Therefore, they always benefit from large scale market, which also opens up opportunities for market expansion. In order to do that it will need to increase its brand awareness. This it can do by building positive image such as in corporate social responsibility. Further, this positive image will impact their sales, and will become passenger’s preferred choice.
1G Among the major global factors affecting the operations of Virgin Atlantic are fluctuations in the prices of fuel and threat from terrorism and war like situation. In some ways both these threats are related to each other. Any terrorism or war like situation in oil-producing countries is likely to have implications on the supply of oil, and therefore contribute to price volatility. Also, any war like situation, particularly where Virgin Atlantic flies, will have direct impact on its operations and bottom lines. Similarly, fluctuations in the price of the aviation fuel, for whatever the reason, have direct impact on the prices and sales from price elastic leisure traveller.
1H We will be evaluating the policies of the European Union, in the context of the business of Virgin Atlantic. Any reduction in the obstacles in cross border trade will promote trade and movement of goods and persons. All these will have a direct impact on the bottom-line due to increased business and cargo traffic. Further any harmonization of technical and safety standards on a large number of products will have favourable impact on the maintenance. It will reduce maintenance cost and chances of error. Also, closer approximation of excise duties and other fiscal barriers, such as VAT, will make the task of accounting and pricing simpler. The prices will be a greater reflection of actual costs. Overall, it will be good for the airlines. Finally, any removal of legal obstacles to trade will have favourable impact on the operations. It will also influence anything to do with pricing.
The US economy is an example of a free market economy. This means that it is run by supply and demand, with some regulation by the government. In a true free market, sellers and buyers manage to conduct their business with any sort of government regulation. Therefore, in free market economies, there is always a debate among economists and politicians about the amount of regulation that is necessary. Those in favour of less regulation, argue that upon removal of restrictions, forces of free market will protect the consumers, provide superlative service and products, and at affordable prices for everyone. In contrast, those who are in favour of government regulations to protect consumers
believe that corporation generally don’t work in public interest.
In contrast, the command economy is a planned economy, and it happens when the government keeps control of all major aspects of the economy. Under this system, it is the government that decides what is to be produced, how to produce, and also how to distribute goods and services with the country. So, one can infer that command economy works contrary to the free market economy.
Lastly, a mixed economy is a blend of free-market and command economy. It has vices and virtues of both the economies. This system feature characteristics of both capitalism and socialism. This system allows a certain level of private economic freedom regarding the use of capital, and at the same time allows the governments to interfere in the economic activity so as to achieve the social aims. Most of the modern economies are a synthesis of two or more economic system. Here the public sector works along with the private sector, and they may even compete for the limited resources. In this kind of economies, the private sector is not blocked from profit seeking. But government may monitor profit levels and may even consider nationalizing them in the larger interest of the public.
We will first evaluate how the prices and output decisions are determined in a perfect competitive market. In the short term, the equilibrium of market prices is determined by the interaction between market supply and demand. Therefore, a firm maximizes profit the marginal cost is equal to the marginal revenue. Also, not all the companies make supernormal profits in the short run. There are chances that some firm may be witnessing sub-normal profit due to the fact that their average total cost exceeds the current market price.
In the case of monopolistic competition, the perfectly competitively firms face a perfectly elastic demand curve for their products. This is because all the firms in their industry segment produce exactly the same product. Therefore, no particular firm can impact the market price based on its size alone. But, the competing firms differentiate their products, and thereby, gain control over the prices.
In case of collusive oligopoly, the firms agree formally not to compete with each other on price or output. These firms can agree on setting up of a quota or prices or limit the production. They may even agree not to encroach on each other’s market. Therefore, the competing firms form a cartel.
References
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CAA, 2013. Guidance On Consumer Enforcement, s.l.: Civil Aviation Authority.
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UKEssays.com, n.d. Elasticity of demand and supply in the airline industry. [Online] Available at: http://www.ukessays.com/essays/economics/elasticity-of-demand-and-supply-in-the-airline-industry-economics-essay.php[Accessed 25 06 2014].
Virgin Atlantic, 2013. Aircraft Noise Management Strategy, s.l.: Virgin Atlantic.
Virgin Atlantic, n.d. About Us. [Online] Available at: http://www.virgin-atlantic.com/us/en/footer/about-us.html
Virgin Atlantic, n.d. Community. [Online] Available at: http://www.virgin-atlantic.com/gb/en/footer/about-us/sustainability/community.html[Accessed 25 06 2014].
Virgin Atlantic, n.d. Virgin Atlantic Environmental Policy. [Online] Available at: http://www.virgin-atlantic.com/tridion/images/newpolicy_tcm19-540700.pdf[Accessed 25 06 2014].
