Introduction

Virgin Australia Airlines, formerly Virgin Blue Airlines, was built in 2000 and became Australias second largest airline after Ansett Australia collapsed in 2001. Now, it is also t e t e largest by fleet si!e to use t e Virgin brand. "uring t e last decade, t e airline as grown to ser#e 2$ cities in Australia. In 2011, Virgin Blues brand name was c anged as Virgin Australia. % is singed t at Virgin was ma&ing truing c allenges to 'antas. % is report aims to analyse and assess Virgin Australias strategic position and future. (enerally, it includes fi#e sections) e*ternal en#ironment analysis, internal en#ironment analysis, current strategies analysis and re#iew, +urrent strategic position and issues to be addressed, and suggestions on future options. ,ome analysis tools are used, including) -.,%/. analysis, -orters fi#e forces analysis, ,01% analysis, etc. ,ome comments are made basis on own opinions of t is team. A number of academic materials and new articles are referred.

.*ternal .n#ironment Analysis

-.,%./ analysis 2see c art 13 stands for political analysis, economic analysis, social analysis, tec nological analysis, en#ironment analysis and legal analysis. It is a strategic analysis t at entails scanning t e general or macro4economic en#ironment to detect and understand t e broad, long term trends 2+apon, 200$3. Basis on -.,%./, t e factors influence Virgin Australia and t e airline industry are analysed as following.

+ art -.,%./ Analysis

1)

2+apon, 200$3

-olitical Analysis)

5irstly, Australian go#ernment

as t e intention to maintain domestic mar&et

competition. 5or many years, Australia adopted two4airline policy in domestic mar&et. 6owe#er, it appeared t at Australian go#ernment as realised t at t is infamous

resulted a duopoly wit parallel pricing 27oos, 8ills 9 0 elan, 20103. In 2002, A+++ 2Australian +ompetition and +onsumer +ommission3 denied t e 'antas and Air New :ealand application for aut orisation. % is re#ealed t e go#ernments intention to maintain domestic mar&et competition 2;ain 9 0ebb 200<3.

,econdly, Australian policies lea#e growt spaces in domestic mar&et for foreign players. % e Australian in#estment guidelines allow foreign airline to ac=uires up to 100> of t e e=uity in an Australian domestic airline or to start a new domestic airline, unless t is is contrary to t e countrys interests. It allows t e entry of foreign in#estments 2;ain 9 0ebb 200<3. % is means domestic players li&e Virgin blue as to face wit competition from foreign entrants as well.

.conomic Analysis

5irstly, according to I85, global financial system

as s own signs of reco#ery

2"attels 9 ;odres 20113. +orrespondingly, t e global tourism as reco#ered strongly since 2010. It was e*pected t at by 201?, t e population of international air tra#elers would reac <.< billion, and @00 million tra#elers would be new. 1f t e @00 million new tra#elers, <A0 million would tra#el on Asia -acific routes 2IA%A, 20113. % e de#elopment potential of international tourism will gi#e new opportunities to Australian airline industry.

,econdly, wit t e + inas rapid economic growt , its outbound tourism de#elops rapidly. According to table, in 1$$B, t e number of + inas outbound departures was merely ?,B20,000. In t is year, it is e*pected t at t e number of + inas outbound departures will reac C@,?00,000, o#er 1@ times more t an 1$$Bs figure 2see table 13 2/i 9 5ung 7esearc +entre, 20103. By 201?, + ina is e*pected to contribute t e biggest of new tra#elersD and 21? million would be associated wit + ina 2"uEuan, 20123. % e rapid growt of + inas outbound tourism will benefits airline industry participially in Asia4-acific region.

%able 1 + inas outbound departures 9 annual growt , 1$$B42012

Fear 1$$B ... 200B ... 2010 2011 2012 2predicted3

"epartures ?,B20,000 <1,000,000 BC,<$0,000 C0,2B0,000 C@,?00,000

(rowt 2>3 21.0> C.B> 20> 22> 12.0>

6owe#er, t e rapid increase of fuel price will significantly affect Australian airline industry. "uring t e last decade, global fuel price as e*perienced a s arp surge. + art 2 represents t at in 2012, t e a#erage price maintains around G100H barrel, w ic is as fi#e times as 2002s price 2+reedy, 200$3. In t e nest future, it is e*pected t at t e global oil demands will a#e a#e grown dramatically, w ile t e oil

producing countries will significantly reduce t e e*porting 27eic , 20123. A e*pected fuel price rise will significantly increase t e airline industrys o#erall costs and t reaten profit of global airline industry .

+ art 2) 1il -rices ,urge

2+reedy 200@3

,ocial Analysis

5irstly, as a worldwide trend, globalisation increases t e integration of societies and ci#ilisations. 0it t e process of restructuring peoples ideas and be a#iours,

26Ealager, 200C3, t e trend of globalisation creates t e Iglobal tourist #illage, w ile gradually c ange international tra#eler be a#iour 2.#ans, 20013. In Australia, t ese c anges are in two aspects) t e c ange in destinations and t e c anges in tra#el fre=uency.

1n one and, during t e past decade, t e population of Australian residents tra#eling o#erseas for trips as grown at an unprecedented rate 2see + art <3. 1n t e ot er and, c art ? re#eals t at t e destinations of Australian tra#elers are turning to be Asia and -acific region 2Australian Bureau of ,tatistics, 20103 to #isit t e eritage sites and learn about different cultures 26Ealager, 200C3. % us, alt oug t e t e leading

destination of Australians was still New :ealand, t e remainder of t e top ten destinations were all in t e Asia and -acific region.

,econdly, peoples issue of en#ironment friendliness is emerging. % us, Virgin

Australia offer its guests t e opportunity to offset t e carbon emissions on any Virgin Australia flig t 2Virgin Australia, 20123.

% irdly, uman beings a#e increasingly depended on Internet and mobile p one ser#ice, w ic promotes tec nological and ser#ice inno#ation in Virgin Australia.

+ art <

2Australian Bureau of ,tatistics, 20103

+ art ?

2Australian Bureau of ,tatistics, 20103

%ec nological Analysis

%oday, wit peoples increasing dependence on Internet and ceil p one, airlines are ma&ing some tec nological inno#ations. According to Virgin statement, t e company continues be t e leader in inno#ation. ,ome e*amples are I+ ec&48ate, app for i- one and Jmobile boarding passesJ.

I+ ec&48ate is an inno#ati#e mobile process, t roug w ic customers could c ec& in and board on by t eir mobile p ones. % e I+ ec&48ate supports almost all popular mobile de#ices, including mobile p ones, ,martp ones, Blac&Berry and i- ones. It.eliminates all paper board passes and replaces t em wit electronic

boarding passes on mobile de#ices and enables tra#elers to do e#eryt ing from t eir personal de#ices 2Virgin Australia, n.d.3.

In 2012, Virgin launc ed anot er two initiati#es) specials app for i- one and Jmobile boarding passesJ for domestic tra#elers. App for i- one pro#ides a one4stop spot to c ec& discounts and enables customers to enter in specific tra#el criteria and set real4 time alerts. % e mobile boarding passes enables ,martp one users to access t e companys mobile website and eases t eir doings 25lynn, 20123.

Besides, Virgin also leads t e inno#ations in in4flig t entertainments. In mid42012, t e company launc ed a new system supported by /uft ansas Board+onnect tec nology to pro#ide Internet ser#ice 2wireless3 in flig ts. by wireless. Alongside Internet access, t e company also added media streaming, w ic beamed mo#ies and music to eac passengers personal de#ices 2Virgin Australia, 20123.

/egal Analysis

In legal conte*t, ade=uacy of competition law applies to t e airline industry as well. % e regulations on ade=uate competition are pro ibited in section ?A of %rade -ractices Act 21$C?3, w ic states t at a company t at as a substantial degree of mar&et power must now ta&e ad#antage of its power to) 13 eliminate or substantially damage a competitorD 23 pre#ent entry of new playersD and <3 deter or pre#ent competiti#e conducts . %o determine a breac of section, A+++ will apply a Ieffects test ;ain 9 0ebb 200<3.

In t is conte*t, A+++s monitoring &eeps 'antas competiti#e. "e#elopment space is lea#ed for Virgin and ot er new entrants in Australian domestic mar&et. 1n t e ot er and, as a industrial giant, Virgins monopoly be a#ior is strictly monitored by A+++ as well 2;ain 9 0ebb 200<3. 5or e*ample, in 2010, A+++ opposed Virgin Blue4Air N: alliance 28ar*, 20123.

.n#ironment Analysis

Nowadays, global climate c ange as been worried by uman beings. ,ince t e early 20t century, t e rapidly rising global surface temperature as ta&en some se#ere en#ironmental problems. 8aEority of scientists agree t at green ouse gases, w ic are poured out t roug burning fossil fuels significantly contribute to global warming. -articularly in recent years, wit t e rapid growt of air tra#el, total pollution attributable to a#iation is increased as well 2Baird , 200@3.

0it t is en#ironment, airlines li&e Virgin a#e stress more attention on ow to reduce emission and t e impact on t e en#ironment. ,ome measures ta&e by Virgin include) t e combined approac of fuel efficiency, carbon offsetting and sustainable a#iation biofuel de#elopment 2Virgin Australia, 20123.

5i#e 5orces Analysis

-orters 21$$03 fi#e forces analysis 2see table <3 can be sued to analysis t e en#ironment of industry w ere Virgin plays. % e analysis is briefly ta&en as below)

%reats of industry ri#alry) in t e Australian domestic mar&et, Virgin as to face wit ig le#el of treats from its competitors. % ese competitors include bot Australias largest flags ip 'antas 2Ketstar3 and some regional airlines li&e 7e*, Airnort and ,&ywest. +urrently, 'antas 2Ketstar3 are competing by restructuring and cle#er mar&eting 20est, 200$3. In recent years, t e reports on battles between 'antas and Virgin ne#er stop. 1n t e ot er and, regional airlines are in a good position to e*pand into t e larger flags ip. Besides, t ere are intense competition in Asia -acific region as well . 6owe#er, as t e mar&et as formed monopoly, eac players mar&et s ares are rele#ant close. % us,t e treats from single competitor is still lower.

% reat of new entrants) t e Australian domestic airline mar&et as formed a duopoly. % e mar&et s ares of 'antas and Virgins a#e reac ed almost $B> 20 alley, 20123. In t is situation, t e enter barrier for new entrants is ig . In addition, due to t e

nature of a#iation, enter re=uirements on in#estors capital and capacities are #ery ig . % us, for t e current maEor players, t e t reat of new entrants is low. 6owe#er, since Australian policy lea#es spaces for foreign in#estment, Virgin sill a#e to watc out for t reats from foreign new players.

% reat of substitutes) Virgin as to face wit

ig le#el of treat of substitutes from

ot er airlines, since Virgins competitors offer t e t reat of competition in almost all routes. In domestic mar&et, 'antas and Ketstars routes co#er all of Virgins networ&. 1#erseas, some international airlines suc as New :ealand, .mirates and ,ingapore Airlines create intense competition to operations on Asia -acific routes. Besides, Australian go#ernment as recently promised to increase t e support in coastal s ipping. +onse=uently, t e airline freig t industry may face wit t e potential t reat from ot er means of transportation 20est, 200$3.

Bargaining power of customers) t e buyers bargaining power for airlines is ig , because of tra#elers price sensiti#e and low s ifting cost. 6owe#er, t ere is different between t e situation amongst business tra#elers and economy class tra#elers. 5or a low cost carrier, buyers bargaining power is #ery ig , as economy class tra#elers are muc more price sensiti#e. 6owe#er, most of business class tra#elers consist of commuters and ig er4earners. % ese tra#elers see less attraction to fly wit low cost airlines but concern more on ser#ice and comfort. % us, business class tra#elers bargaining power is lower t an economy class tra#eler 20est, 200$3.

+ art B

2+apon, 200$3 %able < 5orces %reats of Industry 7i#alry /e#el 6ig in domestic mar&et Analysis % e competition from 'antas for business class % e competition from Ket,tar for low fare flig ts % e competition from regional airlines % e Asia4pacific mar&et is s ared by a number playersD no one absolutely dominate t e mar&et. 6ig entry t res oldD duopoly in Australian

8iddle in Asia4-acific mar&et

% reat of new .ntrants

8iddle4low

% reats of ,ubstitute

6ig

-ower of customers

6ig

domestic mar&etD Australian go#ernments policy and legal conte*t lea#es de#elopment for new entrants +ompetitors pro#ide similar products t at co#er Virgins routes /ow4s ifting costsD price sensiti#e

+ompetition Analysis

As t e No. 1 player in t e Australian domestic a#iation mar&et, 'antas 2Ketstar3 is recognised as Virgins most significant competitor. + art B re#eals t at mar&et s ares in Australian domestic airline mar&et. %ill 2012, 'antas 2Ketstar3 still &eeps t e mar&et s ares of AB>, w ile t e No. Virgin ta&es 2$.2>. All of ot er players Eust ole A> in total 27obin, 20123.

+ompared wit Virgin, 'antas ,econdly, 'antas dual4brand strategy as been a big ad#antage. %o be different wit Virgin, 'antas as two brands t at target different mar&et segments 2'antas Airways /imited, 20113. Bot 'antas and Ketstar brands a#e its own ad#antages and disad#antages.

5irstly, t e 'antas brand pro#ides full4ser#ice airline targeting business and premium leisure tra#elers. +ompared wit Virgins business class, w ic was launc ed in 2011. 'antas brands business as been recognised as t e groups core competency for decades 2'antas Airways /imited, 20113. % us, compared wit Virgin, t e 'antas brand as accumulated well brand identify and e*periences in operating business class. +orrespondingly, it as also built ig le#el of customer loyalty troug its loyalty program.

6owe#er, t e 'antas brand as a #isible disad#antage in is cost structure. Before Ketstar launc ed in 200?, Virgins cost disad#antage was significant. It was estimated t at t e cost of 'antas was <0> more t an of Virgin 2Bart olomeus!, 200?3.

,econdly, Keststar brand, w ic was launc ed in 200? as a low cost carrier focused on price sensiti#e leisure tra#elers 2'antas Airways /imited, 20113. % is strategy &eeps 'antas ad#antage in premium mar&et w ile reduce costs.an establis ed position in t e full fare mar&ets 2-illing, 200$3.

6owe#er, compared wit Ketstar, as t e leader of Australian low cost carriers, Virgin as built strong brand recognition and e*perience in accessing t e low4fare mar&ets. -articularly in recent years, Virgin infre=uently ma&es inno#ations in in4flig t entertainment and Internet and mobile ser#ice 25orsyt , 200<3. In t ese aspects, Ketstar is far be ind Virgin.

% en, compared Virgin, 'antas group as a scale ad#antage as a w ole. %ill 2010, t e group ad operated a large fleet of 2C< aircrafts. %ill 2011, t e great fleet ad offered ser#ices to B$ Australian cities and regional destinations, and 12B destinations in ot er countries. t e 'antas and 'antas/in& brands pro#ided o#er 1,$00 domestic flig ts and A00 international flig ts in eac wee&. Besides, Ketstar, Ketstar Asia and Ketstar -acific brands also offered 1,100 domestic flig ts and <20 international flig ts wee&ly 2'antas Airways /imited, 20113.

+ompared wit 'antas, Virgins business scale is muc smaller. %ill 2012, Virgins fleet ad consisted of around @0 aircrafts, w ic flied to 2< Australian and @ international destinations 2Virgin Australia, 20123. In t is #iew, Virgin was far be ind 'antas in bot fleet scale and route networ&. % us, compared Virgin, 'antas as significant scale ad#antage.

6owe#er, to be different wit newer and younger Virgin t at as de#eloped wit an

e=ually new fleet, 'antas great fleet as faced wit t e issues of renewing and supporting e=uipment to remain competiti#e 20est, 200$3.

+ art B) Australia domestic mar&et s are 220123

+ompetition in International 2Asia4-acific3 8ar&et

1n t e %rans4%asman routes, .mirates Airlines competes wit Virgin. +ompared wit Virgin, .miratess ad#antage is t at t ey can cut cost as t ey can par& aircraft in New :ealand. % us, t e company can offer low fares to customers w o intend to cross t e

%asman.

Air New :ealand, .mirates, Virgin Blue, -acific Blue, ,ingapore Airlines, 'antas, Ketconnect and Ket,tar are Eust some of t e e*isting airlines competing in t e regional, national and international mar&et place. % ey offer t e t reat of competition to t e operations on all new 7outes. +urrently, t e Asia4pacific mar&et is s ared by t ese playersD no one absolutely dominate t e mar&et.

+onclusions 4 1pportunities and % reats

1pportunities

1. Australias policies and regulations on airline industry &eeps competition, restricts 'antas monopoly. It lea#e de#elopment spaces for Virgin Blue, t e maEor competitor of 'antas. 2. % e economic reco#ery brings new de#eloping opportunities. <. % e dramatic increase of + inas outbound tourism lea#es opportunities for Virgin, particularly in Asia4pacific region. ?. % e number of bot Australian residents tra#eling o#erseas and #isitor arri#als to Australia increase rapidly. It pro#ides more opportunities for Virgin Australia, particularly in Asia4-acific region. B. % e con#enient onlineH and smartp one system attracts more customers.

%reats 1. Australias regulations on foreign in#estments lea#e spaces for o#erseas company. % e new entrants would t reaten Virgins domestic mar&et s ares. 2. % e strict monitoring from A+++ also limits Virgins e*pansion. <. 5uel rises significantly increase Virgins o#erall costs and t reaten its profit. ?. % e competitors many ma&e efforts to promote inno#ation. If t ey act =uic&ly,

Virgin may suffer.

Internal .n#ironment Analysis

+ore +ompetencies

+ore competency refers to a uni=ue ability t at a company ac=uires from its founders or de#elops and t at cannot be easily imitated. +ore competencies are w at gi#e a company one or more competiti#e ad#antages, in creating and deli#ering #alue to its customers in its c osen field 2Barney, 1$@A3.

Virgin Australias +ore +ompetencies

-ricing capability) Virgin branded, low cost, low fare carrier operating in t e Australian domestic mar&et. Its w olly owned subsidiary, -acific Blue, would offer a similar low4cost ser#ice. +ompared wit 'antas, Virgin as a low cost structure. % e low fare boots up demand. % us, Virgin attracts many fare conscious leisure or business tra#elers w o mig t ot erwise not tra#eled at all or user ot er modes of transport suc as car, train, bus.

6ig =uality ser#ice) Besides low fares, Virgin Australia also aims to pro#ide ig =uality ser#ice in for bot domestic and internal routes. It placed ,er#ice -romise program. In 2012, Virgin Australia 2-acific Blue3 too& out t e awards for best airline and best airline staff ser#ice in AustraliaH -acific at t e 2012 0orld Airline Awards 2Virgin Australia, 20123.

%urbulence 8odel Analysis

%urbulence is a comple* aggregate of #arious dimensions associated wit c ange. % ese dimensions can be) dynamism, comple*ity and unpredictability 2% ompson,

1$AC3. In Virgin case, t e industry turbulence is associated wit

dynamism and t e

unpredictability dimensions. 5irstly, t e dynamism are mainly associate wit

c anges in tec nologies and customer preference. % en, as t e company is constantly e*panding product range and mar&et segment, t e le#el of comple*ity is increasing. Besides, t e actions of competitor 2'antas3 would be t e main source of predictability.

% us, t e industrial turbulence is rele#ant

ig er. It re=uires a combination of

fle*ibleHcreati#e strategic and customerHcompetitor based management 2% ompson, 1$AC3. %o respond to dynamism turbulence, Virgin stresses 79" and product inno#ation to meet customer preference s ifting. Also, it applies an analyser strategy, w ic includes t e de#elopment of new mar&et segment and product range, to

increase strategic fle*ibility and compete wit 'antas.

Internal Issues

-oor employment culture) to reduce o#erall costs, Virgin Blue also strictly control its labor costs. 6owe#er, it is commented t at t e company did not sufficiently stress employees interests. In recent years, Virgin was sued more t an once by its employees or former employees.

+onclusion4,trengt s and 0ea&nesses

,trengt s) 1. +ompared wit 'antas, low fares attracts more customers 2. +ompared wit ot er low fare carriers, Virgin Australia pro#ides ig =uality

ser#ice, w ic generates ig le#el of consumer identify

0ea&ness 1. % e ignoring on employees benefits may lead to t e outflow of talent employeesD

and 2. Build a negati#e company image.

7e#iew on +orporate /e#el ,trategy

According to Virgins mission statement, t e company aims to redefine t e airline industry in Australia. It aims to become a Inew world carrier.

+omments.

% is mission re#eals Virgins ambition to lead and significantly c ange t e airline industry in t is country. 6owe#er, t is mission seems o#er idealistic to some e*tent, as Virgins limited power as Australias no. 2 carrier. Besides, it is also recommended to increase concerns on corporate social responsibilities.

7e#iew Business /e#el ,trategy

+ost /eader ,trategy)

-orters 21$$03 competiti#e business le#el strategies, firms competiti#e strategies are proposed as four types) cost leaders ip, differentiation, focused cost leaders ip and focused differentiation 2see table ?3. Basis on t is t eory, Virgins strategy can be identified as cost leaders ip strategy. According to -ort 21$$03, a cost leaders ip strategy aims to offer t e lowest costs products to t e entire mar&et. It combines t e sale of standard products wit aggressi#e pricing. % us, t e core of t is strategy is to low production cost. As t e leader of Australian low cost carriers, Virgin identifies its own business model as) pro#iding ig =uality ser#ice wit a low cost base. It is said t at t e ability of maintaining a low cost base is t e core of Virgins growt 2Virgin Blue Airlines, 20113

%able ?

5irstly, Virgin Blue offers point4to4point ser#ice on popular s ort4 aul routes. % ese routes lin& maEor tra#el destinations and population centers wit some secondary and regional airports. % e point4to 4point strategy greatly increases t e ser#ice fre=uency and eliminates t e necessity of full ser#ice, w ic is e*pected by longer flig ts customers. 0it t is strategy, t e company is able to pro#ide a low fare 20est, 200$3.

,econdly, it is belie#ed t at VirginDs operation costs are among t e lowest of Australian airlines. %o low t e operation Virgin limits aircraft &inds. Before , Virgin only used a single type of aircraft, Boeing C<C. % is strategy was insisted until 200C, w en Virgin purc ased ordered 20 .mbraer .4Eets to re4enter t e ,ydneyL+anberra mar&et. 1n t e ot er and, t e company also limits its fleet si!e to reduce t e costs associated wit maintenance, storage and personnel training 20est, 200$3. In addition, Virgin reduces its labour costs by continually impro#ing its wor& force producti#ity 20est, 200$3.

Analy!er ,trategy

8iles and ,now 21$C@3 a#e produced a typology of business4le#el strategies, w ic includes four strategic types) defenders, prospectors, analy!ers and reactors. In t is #iew,
Virgin can be identified as prospector organisation. Analy!ers operate in two types of product4 mar&et domains. % ey s are c aracteristics wit bot prospector and defender. % us, analy!ers a#e to bot opportunities. &eep t eir s ares in e*iting mar&ets and see&ing new mar&et and product

In Virgin case, on one and, t e airline as a rele#ant stable mar&et area of leisure tra#elers. % e company will maintain its low cost strategy to &eep its e*iting ad#antages. 1n t e ot er and, it aims to see& opportunities and bring competition to Australian corporate and go#ernment sectors, w ic are still dominated by 'antas, and international tra#el to and from Australia, w ere 'antas as as t e largest s are. % is two4way strategy represents t e c aracteristics of a analy!er.

+ art A

+omments)

After one decade rapid growt , Virgin as become t e leader in low4cost carriers. Its cost leader strategy is &ey to t is great success. % us, it is sagacious to &eep Virgins

mar&et s ares in Australia leisure mar&et. 6owe#er, t e enter of new low fare carriers suc as Ketstar or %iger, Virgins low cost strategy is facing wit c allenges. % us, it is also ad#isable to con#erge its low cost strategies and de#elop a new long term strategy in order to maintain or increase profitability in t e long term future. 6owe#er, it mig t be not t at sagacious to compete against 'antas in business tra#eling mar&et.

+ertainly, Virgin could introduce business ser#ice to impro#e product differentiation. 6owe#er, it is not smart to engage itself in t e battle for business class. 5irstly, as AustraliaJs largest domestic and international airline, 'antas business class ser#ice as been recognised as t e companys core competency. "uring t e t e long tern operation, 'antas as built stong brand identify and close relations ip between business tra#eler. +ompared wit 'antas, Virgin lac&s of e*perience in business class ser#ice. % e most important t ing is, in a s ort time, it is ard for Virgin to c ange peoples brand identify and purc ase be a#iour. % us, at t is time, it is not ad#isable to fig t for business class mar&et wit 'antas.

7e#iew on 5unctional 28ar&eting3 ,trategy

5unctional strategies specifically focus on functional area, suc as uman resources, finance, product de#elopment and mar&eting. % is section is about Virgins mar&eting strategy. 7ecently, it also targets growing Australian business tra#eler and regional mar&et. % ese strategy s ifting re#eals t e companys intention to identify corporate image as a low cost and c allenger brand to all mar&et segments 2Virgin Australia, 20123.

%o ac ie#e abo#e strategies, Virgin is tailoring its product wit

pro#iding cost

efficient and ig =uality ser#ice #alued by all passengers. ,ome recent conductions associated wit t is strategy includes t e introduction of business class ser#ice

2A<<03, t e impro#ement in in4flig t entertainment and food ser#ice , uniforms and

li#ery and ot er new e=uipments 20alton, 20123. %o de#elopment a broader and deeper networ&, Virgin also builds strategic partners ip t roug alliances and des are agreements. 5or e*ample, Virgin was purc asing A0 per cent of %iger Airlines for G<B million, and made a ta&eo#er offer for ,&ywest of G$@.C million 27oc elle, 20123.

+omments

5irstly, Virgins tie4up wit budget airline %iger Airways implies its intention to &eep its leading position in low4fare mar&et. 7ecently, t e rapid growt of Ket,tar is t reatening Virgins leading position. 0it t is situation, t e deal tiger greatly increase Virgins fleet si!e and capacity. % is compensates for Virgins wea&ness in economic scale. +orresponding, Virgin would be able to pro#ide more attracti#e for customers. It is e*pected t at wit t is deal, Virgin will ac ie#e more mar&et s ares in low4cost mar&et.

,econdly, t e ac=uisition of regional carrier ,&ywest implies Virgins ambition in Australia regional mar&et. % is means Virgin would be in all segments of Australia airline industry. -articularly, mining industry as become a pillar industry in t e national economy. % e ac=uisition enables Virgin transport so4called fly4in fly4out miners to #arious mines around Australia.

In addition, as abo#e mentioned, Virgin as begun to pay attention on international mar&ets. It is a good switc ing. 6owe#er, is seems Virgin as not paid enoug attention on t e emerging mar&et in Asia4pacific region particularly in + ina, w ere many international airlines a#e targeted. 5or e*ample, 'antas as opened new routes between Australia and maEor cities in + ina. 6owe#er, it loo&s t at Virgin falls be ind its competitor.

+urrent strategic position and issues to be addressed

Virgin Blues strategy is to retain its leader position in leisure domestic mar&et w ile bring competition to business mar&et and international mar&et. It aims to attract a ig er proportion of Australian corporate, go#ernment and international tra#ellers. % us, Virgin is facing wit t e s ifting from a low carrier to a New 0orld +arrier 2N0+3 2Virgin Australia, 20123.

6owe#er, some issues is addressed. 5irstly, wit t e increasing in#estment in ig end mar&et and t e rise of fuel price. 6ow to control operation costs become a significant issues. ,ince if t e company fails to control costs, it will lose its leading position in low fare mar&et. ,econdly, to be different wit 'antas w ic as operated business

class for long term, Virgin is sill mar&ed as a low cost carrier. % us, t e company as to t in& about ow to c ange its brand image t at is lin&ed wit low fare and attract ig end customers. Besides, wit t e intense competition in Asia -acific region, ow to attract customers and ta&e mar&et s ares is also a c allenge.

7ecommendations

In a business le#el, it is recommended Virgin to temporarily con#erge its ambition on business tra#el mar&et and a#oid being immersed in battle for business, as 'antas strong competiti#e ad#antages of economic scale and business class segment.. 7at er t an placing large in#estment to compete in 'antas ad#antages, Virgin s ould cut inputs in business class, and aim to &eep its traditional ad#antages as well as to de#elopment new ad#antages. It is ad#isable to pay more attention to de#elop regional mar&et and e*pand in emerging Asia -acific mar&et, particularly in + ina.

5irstly, Nowadays, Virgin Australia merely as routes lin& Australia wit two + ina maEor cities, , ang ai and BeiEing. It is recommended to open new routes and de#elop new destinations in + ina. %o ac ie#e t is, t e e*perience of AirAsia, a 8alaysian airline ser#ing sout 4east Asian destinations can pro#ide some stimulation. 5or e*ample, Virgin can learn to)

13 1pen 8icro4blog at + inese platform, suc as ,ina 0eibo, to announce discount information and company newsD 23 ,upport popular + inese local t ird party payment platform, for e*ample : ifubaoD <3 Increase flig ts to reduce costsD ?3 %arget mass second4line mar&et, suc as , suc as %ianEin, Mian, + ong=ing, Nanning and ot er maEor second4line big cities.

,econdly, to attract customers from Australian regional mar&et, it is recommended to)

13 Increase ad#ertisement budgetD 23 +ooperate wit local mainstream media to old some campaigns particularly in minging regions.

% irdly, it also suggests Virgin to acti#ely engaged in +,7 acti#ities to establis a positi#e brand image.

+onclusion

%o sum up, basis on e*ternal analysis, macro en#ironment lea#es a lot of growt space for Australian airline industry. 5irstly, Australias policies and regulations on airline industry &eeps competition, restricts 'antas monopoly. ,econdly, positi#e economic situation and t e globalisation trend bring more tra#elers. % irdly, t e emgering Asia4 -acific H+ ina mar&et as created great potential mar&et. In addition, t e con#enient onlineH and smartp one system attracts more customers. All of t ese factors pro#ides new opportunities for Virgin. 6owe#er, e*ternal analysis also implies some treats. 5irstly, t e foreign in#estments may enter and s are Australia domestic mar&et, as Australias regulations on foreign in#estments lea#e spaces for o#erseas company. ,econdly, t e strict monitoring from A+++ also limits Virgins e*pansion. % irdly, 5uel rises significantly increase Virgins o#erall costs and t reaten its profit. Also,

Virgin as to &eep alert on competitors tec nological inno#ation. 1n t e ot er and, basis on internal analysis, Virgins strengt s are t e attraction of low fares, its ig =uality ser#ice, and a ig customer identify as a industrial leader of low4cost flig ts. 6owe#er, Virgin is criticised for its ignoring on employees benefits. It may lead to t e outflow of talent employees, and a negati#e brand image. % us, alt oug Virgins current cost leader strategy is still appropriate, owe#er, some adEustments are necessary. It recommends Virgin to a#oid being immersed in battle for business, but target emerging regional and Asia4-acific particularly + ina mar&et. Also, it s ould acti#ely conduct +,7 actions to build a positi#e brand image.

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