Virgin America

3677 Words15 Pages
virgin america
Analysis & Strategic Plan

strategic management 780-634
Michele K. Masterfano, DBA
LeBow College of Business
Drexel University
Summer 2012

Table of Contents

OVERVIEW 1

Fast Facts 1

ENVIRONMENT 3

Internal Analysis 3

Company Structure 3

Company Culture 3

Operations & Logistics 3

Triple Bottom Line 3

SWOT 3

External Analysis 5

Competitive Environment 5

Summary 8

External SWOT Analysis 9

Summary 13

FINANCIAL 14

FUTURE 15

Potential 15

Expansion 16

Merger 16

Acquisitions 16

IPO 17

Additional Recommendations 17

SUMMATION 18

REFERENCES 19

Virgin America was founded by serial
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Using Michael Porter’s “Five-Forces” model it is possible to gain an understanding of where Virgin stands in relation to the competition and how it can adjust to increase its competitiveness. The diagram below is a graphical representation of Porter’s model.

Threat of New Entrants

1. Threat of Foreign Carriers – Many large foreign airlines are expanding their reach to new market segments that are likely to encroach on Virgin’s market share. Emirates air, Cathay Pacific, and Qatar airlines have all been successful at stealing market share from their US competitors on domestic and international routes (Mayerowitz, 2008).

2. Low Cost and Regional Airline Startups – Companies like Jet Blue, Ryanair (European), and EasyJet (AirTran) are all LCC’s that have potentially devastating effects on market share for larger more expensive airlines (The Economist, 2004).

Bargaining Power of Suppliers

1. Fuel Companies – Fuel is one of the airline industry’s largest variable costs (on average 40% of their budget). Aside from hedging or put and call options, which can backfire, airlines are at the mercy of fuel companies and have very little bargaining power (Hargreaves, 2012).

2. Aircraft Manufactures – Manufacture rates are typically discounted by
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