Introduction
Strategy is about achieving competitive advantage. A company can achieve this by being different, delivering a unique value addition to the customer and by having a clear and enact-able view of how to position itself uniquely in the industry. This essay uses Virgin Blue as a case study to find out if it has successfully achieved strategic competitiveness in the Australian airline industry. The I/O and the Returns-based models of above average returns are central in classification of external and internal environment elements.
Strategic Management and Strategic Competitiveness
Strategic management is the systematic analysis of the external and internal environment to form a basis of re-evaluating the current management practices with the aim of achieving better alignment of corporate policies and strategic priorities. Strategic competitiveness is achievable when a company formulates strategies that give it an edge over its competitors.
The strategy formulated should be rare, that current and potential competitors are unable to duplicate because it is costly, and in that way the firm achieves sustainable competitive advantage. The 21st century competitive landscape is rapidly changing because of technology and uncertainty. This means that managers have to adopt new ways of thinking. Managers have to value flexibility, innovation and speed in responding to existing competitors and new entrants to remain in business.
These characteristics may have affected the entry and survival of Virgin Blue into the Australian airline industry. In order to enter the market, Virgin Blue had to introduce low cost and take measures to keep the costs low and using imaginative tactics of thinking outside the box to remain innovative.
External Environment
External environment consists of factors outside the control of the firm that affect the ability to meet customer demands and that face the whole industry. These factors based on resource-based model include political, economic, socio-cultural, technological, and legal. They determine the laws to apply in running business, the economic conditions that the firm will have to operate in, the characteristics of the market, and the technology determines the way the product should be (Millmore, 2007).
In the case of Virgin Blue, the economic aspect of external environment can be considered to have crucial importance. The rising fuel costs, increasing operating costs, and increasing terminal costs are some of the economic challenges the Virgin Blue faced as it pursued its low cost services strategy.
Additionally due to the economic slowdown in 2008, Virgin Blue recorded a loss of $160 for the financial year 2008-2009. This loss must have had a great influence on how the firm was to be run to survive this period until the economic recovery period in 2010 when Virgin reported a profit of $21.3 million.
Internal Environment
Internal environment encompasses elements that are specific to a firm and affect its ability to meet customer. Financial resources, organizational resources, physical resources and technological resources are the tangible elements considered to affect the internal environment of a firm in Resource-based model of above average returns. On the other hand, the intangible elements are human resources, innovation resources, and reputational resources (Michael and Hitt, 2010).
Virgin Blue being in the service industry depends more on its intangible resources. The friendly crew has been known to greet passengers as boys and girls, entertain them with rock music on takeoff and landing, make jokes and read horoscopes in-flight. This good customer relation enhances customer loyalty therefore enabling the firm to attract new customers while retaining the current ones.
Financially the firm has been able to cut down costs by the improved scheduling system, self check-in kiosk’s, outsourcing of catering, managing catering wastage, maintenance agreements and a fuel efficiency program (Carnal, 2007).
Business Level Strategies
Business level strategy is the strategy a firm chooses in order to gain competitive advantage in the market or industry it operates. This is critical when a firm operates in an industry with intense competition like the one Virgin Blue operates in. Managers therefore have to formulate a strategy geared towards creating and implementing a strategy that gives it the competitive advantage over the other players in the industry (Christensen, 2006).
There are five business level strategies; cost leadership, focused cost leadership, differentiation and focused differentiation. Firms make a choice whether to be a cost leader which means it will focus on competing for customers based on the pricing while still being able to report more than average returns. Alternatively, a focused cost leader meaning that it will not only compete in terms of price but also will segment it and market its products to a particular market.
On the hand, firms have a can differentiate products. Firms choosing just to differentiate by providing unique characteristics and features do so through high quality advanced technological features and customer service. A firm that differentiates and chooses a market segment to provide goods and services uses focused differentiation (Hanson et al. 2011).
Virgin Blue evidently from the national point of view has chosen the cost leadership strategy by delivering services that are of acceptable standards to customers at a cost considered lowest among the competitors in the Australian market.
The firm has cut down costs and trimmed unnecessary ones to achieve its strategy. It has done so by paying its staff less than Qantas, all in-flight meals and entertainment are provided at a cost, outsourcing catering, managing catering wastage and using one type of aircraft. A cost leadership strategy helps a firm survive since it is able to remain profitable even in the face of rivalry, new entrants, suppliers’ power, substitute products, and buyers’ power (Bowles, 2011).
Conclusion
Virgin Blue has successfully achieved strategic competitive in the 8years it has been in the market. It has been able to survive the economic downturn in 2008-2009 and bounce back to reporting profits a year later in 2010 while still maintaining its cost leadership strategy.
Additionally Virgin has introduced competitive moves that include the introduction of a frequent flier program, a member lounge, and strengthening marketing and code sharing alliances with international airlines and by so doing remaining in the market when other airlines like Ansett went under (Beer, 1999).
Reference List
Beer, M. (1999). Readings in Human Resource Management. New York: Free Press.
Bowles, M. (2011) External Environment. The Institute For Working Futures. Web.
Carnal, C. (2007) Managing Change in Organizations. Essex: Pearson Education.
Christensen, R. (2006) Roadmap to Successful Strategic HR Management. New York: American Management Association.
Hanson, D. et al. (2011) Strategic Management: Competitiveness and Globalisation. Southbank, Victoria: Cengage.
Michael A. & Hitt, R. D. (2010) Strategic Management: Competitive and Globalization , Concepts. London: Wiley.
Millmore, M. (2007) Strategic Human Resource Management: Contemporary Issues. Essex: Pearson Education.