Above you will Porter’s Value chain of the internal operations map listing every business components. Porter’s Value chain is used in order to see how an organisation can gain competitive advantage.
As you can see above Virgin Australia believe that it has competitive advantage within it’s Human Resources Management, especially in recruitment and training of staff whether customer service, cabin crew training or pilot training. Due to Richard Branson being a well known British entrepreneur that is the shear force driving the name of the Virgin brand. This gives Virgin Australia an untapped advantage in the area of brand exposure and promotion. Virgin’s promotion and advertising is an area where it needs work but given who’s in the driving seat (Richard Branson), this could be exploited as a strength by Virgin Australia to build on. Competitive disadvantage for Virgin Australia is most seen in yield management( different pricing strategies, based on trying to understand, anticipate and influence consumer behavior in order to maximize revenue or profits), this is due to having the worst seat utilisation figures compared to New Zealand competitors. Regarding other airlines in the New Zealand market , the most significant areas of competitive advantage and disadvantage, are listed below:Air New Zealand:Advantage :Yield management (best seat utilisation), Great onboard service.
Air New Zealand hold the best competitive advantage in the area of B2C advertising and promotions, within New Zealand . However, Air New Zealand have now moved away from major advertising schemes.But still hold advantage in promotions to Government. Star Alliance Frequent Flyers is also an area of promotional strength.Disadvantage:Cost Structure, on the way they currently spending their money.
Qantas:Advantage :Ticketing, booking, gate operation.Frequent Flyers is also an area of promotional strength. onboard service and Yield management (best seat utilisation)Disadvantage: Cost structure, promotional and advertising in New Zealand.JetStar:Advantage: Promotional advantage – combining low prices and meals Disadvantage: Ticketing, booking, gate operationSingapore Airlines:Advantage :Ticketing, booking, Frequent Flyers is also an area of promotional strength.
Onboard service and Yield management (best seat utilisation). Well respected airline service in the world. A lot of aircrafts with many variation in sizes. Disadvantage: Cost structure,gate operation promotional and advertising in New Zealand.
Option’s/ Alternatives and RecommendationsOption 1: Virgin Australia forward integration into travel retail in NZIn New Zealand the travel retail market is in an untapped market for airlines with future that can booster travel agency’s to the next level in terms of advertising, marketing and untaped profit. With Australia being the neighbouring country resources whether in New Zealand or in Australia it is easy to find companies to gain alliances and keep travelling to a low cost. Virgin is already forward integrated in the UK with virgin Holidays. Which has created ‘one-stop shop’ convenience for consumers in the UK. In New Zealand if Virgin enter the plan scheme it will be at a huge advantage due to it being untapped. Due to Virgin being such a large corporation the capabilities of entering the market is low.
Virgin Holidays being integrated in NZ is very beneficial due to alot of tourist attractions in and around us including the pacific islands. Virgin Holidays has international alliances/ associations with Harvey World Travel, Travelscene and Gulliver’s travels NZ. This will offer seamless service to customers from itinerary to connecting flights to accommodation and sightseeing. Which in turn will offer excellent cross promotional opportunities.This will create seamless travel plans for consumers making Virgin Australia a preferred airline which in turns pushes and squeeze other airlines to profit losses and consumer losses. Option 2: Virgin Australia forward integration alliance with Air New Zealand.Should Virgin Australia enter the New Zealand airline market, which is happeaning, itwould create a very crowded industry. Existing airlines are already struggling to find a niche that is profitable.
It is likely that Virgin’s entry into the market will signal the likely forced exit of at least one existing airline, most likely Jetstar, which is the weakest ofthe airlines. Due to bad public ratings because of baggage handling, customer support/ service and overall in flight service. Virgin Australia will form a corporation alliance with Air New Zealand in regards to flight scheduling, airport lounge access, pricing and frequent flyer programs in the Trans- Tasman region.In order to gain total control of the Trans- Tasman geion and flights going in and outside New Zealand with the bigger picture trying to force out the like of Qantas and Jetstar.
I predict that should Virgin Australia enter the New Zealand market, then the mid-termresult could be as follows:Air New Zealand- Already having control of the market but to also improve offering (in alliance with Virgin) to challenge JetStar, or exit the market.Singapore – to take up the business travel segment as usual and the longer flights Qantas – to keep flight routes coming but not as often Virgin – to take up a budget-conscious business niche and some high-end leisure travel with Air New Zealand JetStar – to solidify in the low cost leisure segmentVirgin Australia will likely to seek alliance on freight and lower business class seats and flights to squeeze other competitors out. Likes of Qantas and Jetstar. Air New Zealand to focus on high business class seats and flights to completely dominate, where is has clear advantage in the New Zealand market. Option 3: Virgin Australia create a hub in New ZealandSince the New Zealand tourism market is currently a booming industry, I believe it would be a great idea for Virgin Australia to build and create a hub here in New Zealand whether in Wellington or Auckland.Not only it encourages further movement towards my other two options but it connects the Pacific islands to New Zealand which will in turn create profit into the near future and also another market niche that can be looked into exploiting. New Zealand is a great place for hub due to it being close to the Pacific Islands. One quarter of New Zealanders are from the Pacific islands this in turn means New Zealand is currently heavily travelled by Pacific islanders which is another great market.
Having a hub here means you become a dominant player in the market and the Pacific island market. Virgin Australia offers great lower business class seats and flights which will put squeeze on other competitors. Pacific islands countries being not very develop and poor compared to bigger countries like Australia and New Zealand, cheaper seats and low freight costs will make flying and other countries accessible for countries like Tonga, Samoa and Niue. The demand will show exciting times for Virgin Australia.