Virgin Atlantic
Virgin Atlantic
Introduction
Virgin Atlantic is an international airline company that operates under the Virgin Group, which is owned by Richard Branson. Singapore airlines are also minority shareholders in the airline. The airline is based in London’s Heathrow airport, within the United Kingdom (Virgin Atlantic, 2012). The carrier serves over seventy different destinations around the world. The company has positioned itself as a high class career, therefore, appealing to the high end of the market. Provision of superior services is the carrier’s main selling point (Virgin Atlantic, 2012). Virgin Atlantic offers three classes of services; economy; premium economy and upper class. Sixty percent of Virgin Atlantic (VA) customers are UK citizens. VA mission is “to grow a profitable airline, that people love to fly and where people love to work” (Virgin, 2012). VA has been recording strong financial performance despite the rough time that the airline industry has been experiencing.
In the 2011 financial year, VA recorded a pretax profit of £46.8 million (Virgin, 2012). VA’s revenues, during the same financial period, stood at £2.740 billion. VA operates within the global aviation industry. The global aviation industry is a highly saturated industry. This means that the industry comprises of numerous competitors fighting for a limited number of customers. VA main competitors include; British Airways, American Airlines, Delta Airlines, Lufthansa, Fly Emirates, KLM, Qatar, and many others. Rising fuel and labor costs are also significant challenges within the aviation industry. Enhancing operation efficiency remains the best strategy for organizations to survive in this industry. This paper evaluates how VA has used information technology to enhance its efficiency and competitiveness.
Virgin’s Organization and Management Systems
VA organizational and management systems lack a hierarchical structure. The organization has established a lateral organization structure where most employees operate on the same plane. There is no board of directors within the organization. VA decision making process is left to Richard Branson and a few top executives (Virgin Group, 2011). The lateral organizational structure has enhanced innovativeness by empowering employees to make business exploits. One of VA’s values is to construct a setting where people adore to work. Empowering employees is one of the efforts made to motivate its employees by the company. Virgin’s employees are highly empowered to make decisions on behalf of the company. The lateral nature of the organizational structure has made the firm extremely flexible in term of responding to situations. The management system has shortened the lines of communication thus reducing the time taken to make decisions. The management system has also empowered employees to make decisions on behalf of the organization.
VA lean senior management team has also enabled the organization to save on costs. VA management team comprises of Richard Branson and a few other executives. The lean management structure has enabled the organization to reduce costs. Branson, the founder of VA, has been instrumental in the management of the airlines. His famous personality has served as an advantage to VA (Virgin Group, 2011). His unconventional management style and business exploits have made Branson a famous personality. Though this flexible management structure has worked for VA, the sustainability of this structure has been heavily criticized. VA does not have a structure management system because it is dependent of Richard Branson to make the strategic decisions of the company (Virgin Group, 2011). Richard Branson can lead this organization forever and; therefore, there is a risk that the current management style may not fit a new CEC. Divestiture is also an essential part of Virgin’s strategy. Apart from the airline business, Virgin Group has invested in other industries such as; transport, telecommunication, banking and many others. Divestiture has enabled the organization to spread risks.
Virgin’s Information Technology Environment
Advancement in information technology has brought radical changes in the way companies operate. They have also led to the restructuring of industries (Buhalis, 2003). The aviation industry is one of the industry which have been most affected by technology. The aviation industry is heavily dependent on information technology. The industry relies on information technology to ensure timely and safe movements of aircrafts (Buhalis, 2003). Technology has enhanced communication among air terminals and between aircrafts and ground crew. It also used to manage landing and takeoff information, weather information and other data that are crucial to the operations of airlines. Information technology has also become an essential tool the facilitate movement of passengers and cargo (Buhalis, 2003). Airlines use information systems to book in passengers and track cargo through the journey.
In the modern aviation, information technology is not only an operational tool but has also become a competitive tool (Buhalis, 2003). Apart from using information technologies to facilitate essential operation, airlines are also using these technologies to create a competitive advantage. Some airlines are using information technology to drive cost saving efforts. These airlines invest in information technologies that enhance the efficiency of their operations (Buhalis, 2003). For instance, investing a supply management system enables the airline to enhance efficiently thus enhancing competitiveness. Airlines are also using information technologies to enhance customers’ experience. Technologies such as online reservation systems not only save cost but improve convenience by ensuring that customers can make bookings without going to the physical offices of the airlines. Cargo management system also enhances customers’ experience by ensuring that cargos arrive to their destination in time.
The technology environment is very dynamics. Information technologies that provide different solutions to the aviation industry are developed every day. Improvements are also made on existing technological solution. Airlines have to keep track with the transformations within the technological field on order to remain competitive. Airlines that fail to keep in pace with the changes in the technological environment risk becoming uncompetitive as other airlines adopt the new technology. This has become a challenge to the airlines.
Application of Information Systems to Managing Virgin’s Business
VA has invested in information technology in order to enhance its competitiveness. Technology has become an essential part of all of virgin’s operations (Virgin Atlantic, 2012). The carrier has used information technology to develop innovative solutions for enhancing it daily operations. Technology has enabled VA to conduct is activity faster and more cost effectively than in previous occasions. Align IT investment with the objectives of the business. One area in which VA has applied information technology is in flight management. This is an essential requirement for all airlines (Buhalis, 2003). Airlines need information technology in order to facilitate safety and smooth movement of flights.
VA has also applied technology to manage its reservation and ticketing activities. Reservation and ticketing has a direct implication on the company’s revenues, as well as, customer experience. Ticketing is VA’s largest source of revenue (Hewlett Packard, 2012). An efficient reservation system enhances an airline’s ability to manage revenues. This is because revenues will be recorded accurately. An efficient reservation and ticketing system also enhances the customers’ experiences. VA’s reservation and ticketing system provided enhanced customer service and lower cost to the organization. The systems have been designed to meet the unique needs of the market. The reservation systems offer passenger processing services.
Virgin Atlantic has also invested in fuel management system. Fuel cost is one of the largest cost elements for airline business. There have been drastic increases in fuel prices over the last decade piling a lot of pressure on airline businesses. According to Herbst (2011), in 2011, the fuel cost for 8 of the largest airlines was $9 billion more that the cost in 2010. The cost of crude oil has risen from $70 per barrel to $90. The high fuel prices has increased the cost of doing business for airlines thus, reducing the airlines competitiveness. VA has introduced an information technology that will enable the organization to enhance fuel efficiency. VA estimates that the new system will save the company more than $20 million every year (EVA International, 2012). The system enables the airlines to measure fuel efficiency and aircraft performance. This will not only have an impact of VA’s cost but will also have a positive impact on the environment by reducing carbon emission.
VA has also applied technology in human resource management system (Virgin Atlantic, 2012). Providing superior customer experience is VA essential selling point. Customer satisfaction is largely determined by the level of employee satisfaction (Appelbaum & Fewster, 2009). This is why VA has invested a lot of resources toward developing its human resource. VA management structure focuses on empowering it employees and enhancing their contribution to the company. Information technology has played a critical role in the realization of VA human resource goals. VA has invested in advanced human resources management systems. These systems facilitate human resources processes such as hiring, training, compensation and performance appraisal. Information technology has enabled VA to develop a pay schedule that is based on the accurate job description of its employees (Virgin Atlantic, 2012). Technology has also been used to enhance communication among employees thus enhancing the sense of empowerment. The technology also facilitates training programs for VA’s employees.
VA has also applied information technology in managing customer relationship. VA business strategy is based on creating close relationships with customers in order to create brand loyalty. This strategy has enabled the carrier to develop a strong brand resonance among its client. Technology has played a critical part in the realization of this goal. Information technology has facilitated connection between VA and its customers. VA makes use of information technologies such as websites, emails, and social networks to communicate essential information to customers. The company has also applied technology to develop an efficient frequent flyer system. This is a reward system that is designed to establish an attachment between the airline and its customers.
Finance and procurement is another area in which VA has implemented information technology. VA’s finance and procurement department is responsible for controlling the cost of the organization (Virgin Atlantic, 2012). The department is ensures that the company’s procurement activities remain within the company’s budget. This is an essential role especially when considering that the aviation industry has been grappling with the problem of escalating costs. VA was an early adaptor of the airline financial systems. These systems have revolutionized VA’s financial processes making them extremely efficient (Virgin Atlantic, 2012). The systems have made significant impacts on VA’s financial goal of achieving financial excellence.
VA has also employed technology to facilitate strategic alliances. Strategic alliances are essential elements in the airline business (Buhalis, 2003). Airlines need to forge alliances with other airlines in order to enhance customer services. Strategic alliances enable VA customers to reach destinations that VA aircraft do not fly. It also enables VA customers to access other services such as ground transport and accommodation services. VA has entered into alliances with establishments that provide such services in order to enhance customer experiences (Buhalis, 2003). Technology has been a central pillar in the establishment of strategic alliances. Information technology facilitates booking information between VA and it partners. It ensures information is transmitted seamlessly to the organization’s partners thus, facilitating seamless services.
Conclusion
Virgin Atlantic is a modern airline that operates within the global aviation industry. Like in many industries, information technology has become a central element in the aviation industry. Information technology is being used to facilitate many functions within the industry. Technology has not only become an essential operational tool but has become a fundamental basis of competitive advantage within the aviation industry. This paper has examined how VA has implemented information technology in its management processes. The paper reveals that information technology has turn out to be a crucial part of most of VA’s operation.
References
Anonymous (2011). Virgin Group: Exploring Corporate Strategies. December 11, 2012. http://esecourses.com/cfincase.pdf
Appelbaum S. & Fewster B. (2009). Human Resource Management Strategy in the Global Airline Industry. December 11, 2012. http://www.touchbriefings.com/pdf/12/avia031_p_apple.pdf
Buhalis D. (2003). Strategic and Tactical Use of ICT in the Airline Industry. December 11, 2012. http://epubs.surrey.ac.uk/1120/1/fulltext.pdf
EVA International (2012). Virgin Atlantic to Save £20 million Every Year with Fuel Efficiency Tool. December 11, 2012. http://evaint.com/industry-news/virgin-atlantic-to-save-Ap20m-year-with-new-fuel-efficiency-tool
Herbst R. (2011). The Drastic Impact to Airlines from Fuel Price Increases. December 11, 2012. http://www.2hedge.com/pdf/jetfuel0311.pdf
Hewlett Packard (2012). Virgin Atlantic Selects EDS for Next Generation Airline Reservation System. December 11, 2012. http://www.hp.com/hpinfo/newsroom/press/2008/081201a.html
Virgin Atlantic (2012). Information Technology. December 11, 2012. http://careersuk.virgin-atlantic.com/head-office/information-technology.html
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