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BUSINESS POLICY PRESENTATION FOR ISMO KUHANEN

BUSINESS POLICY PRESENTATION FOR ISMO KUHANEN. Mark Bentman Boyd Hargreaves Dave Horton Richard Kirk Scott Morris Matt Whiting. History of Virgin What is TOWS? TOWS 1 Profile TOWS 2 External Environment TOWS 3 Forecasting & Planning TOWS 4 Internal Environment

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BUSINESS POLICY PRESENTATION FOR ISMO KUHANEN

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  1. BUSINESS POLICYPRESENTATION FOR ISMO KUHANEN

  2. Mark BentmanBoyd HargreavesDave HortonRichard KirkScott MorrisMatt Whiting

  3. History of Virgin What is TOWS? TOWS 1 Profile TOWS 2 External Environment TOWS 3 Forecasting & Planning TOWS 4 Internal Environment -Management & Organisation -Business Operations -Finance -Marketing M. Bentman R. Kirk M. Bentman S. Morris S. Morris M. Whiting M. Whiting M. Whiting D. Horton R. Kirk PRESENTATION STRUCTURE

  4. TOWS 5 TOWS 6 Strategic Choices TOWS 7 Consistency testing & Contingency Planning Conclusion B. Hargreaves B. Hargreaves B. Hargreaves M. Bentman PRESENTATION STRUCTURE

  5. WHAT IS TOWS? “It is proposed as a conceptual framework for a systematic analysis that facilitates matching the external threats and opportunities with the internal weaknesses and strengths of the Organisation”

  6. RICHARD BRANSON • Archetypal Hippy Capitalist • Aged 16 Established “Student Magazine” • 1979 - Started selling LP's by Mail Order • Personal Finance of £800m +

  7. VIRGIN HISTORY

  8. VIRGIN HISTORY • 1979 - Virgin Founded • 1971 - First London Shop • 1973 - Record Company, Music Publishing Company, Recording Studio operation and an export Company • 1984 - Virgin Atlantic Airways and Virgin Cargo launched

  9. VIRGIN HISTORY • 1985 - Virgin Holidays formed • 1992 - Virgin Music Group sold to Thorn EMI • 1993 - 3 separate Holding Companies: • 1) Virgin Retail Group • 2) Virgin Communications • 3) Virgin Holding And Virgin Travel Group

  10. VIRGIN HISTORY • VIRGIN ATLANTIC AIRWAYS • The beginning………...

  11. VIRGIN HISTORY • Avoid Mistakes of Laker • Economy section combined with 1st class section at business class prices (747 Aircraft) • 22nd June 1984 - Inaugural Flight, Gatwick - Newark • September 1984 - Fields Contract terminated

  12. TOWS STEP1ENTERPRISE PROFILE

  13. THE ENTERPRISE PROFILE FUNDAMENTALS • What is Virgin’s business • Who are Virgin’s customers & What do they want? • What should Virgin’s business be?. ( Mission statement)

  14. THE ENTERPRISE PROFILE • GEOGRAPHIC ORIENTATION • Where are Virgin’s customers? • Where are those who should be Virgin’s customers but are not at present?

  15. TOWS STEPS 2 & 3EXTERNAL ENVIRONMENT &PREPARE FORECAST

  16. ANALYSIS OF EXTERNAL ENVIRONMENT • Economic Factors • Social & Political Factors • Products & Technology • Markets and, • Competition

  17. ECONOMIC FACTORS • What is a threat to one firm is an opportunity to another as shown by:- • Depression • Boom

  18. SOCIAL FACTORS Opportunity • Consumer Expectancy Threat • Dependent on one person

  19. POLITICAL FACTORS Opportunities • Deregulation • Article 86 of the treaty of Rome

  20. PRODUCT AND TECHNOLOGY OPPORTUNITY • Virgin provide a high quality product THREAT • Technological advance

  21. MARKETS Opportunity • Franchising • Far East Routes Threat • Franchising

  22. COMPETITION Opportunity • Effects of Dirty Tricks Threats • Resources • Deregulation

  23. OTHER FACTORS Threats • Crashes • Terrorists • Strikes

  24. DIRTY TRICKS In 1991 Virgin launched complaints on B.A. over issues known as “DIRTY TRICKS” What were these “Dirty Tricks” • Predatory Pricing (1991) • Lord King stressed Virgin weren’t competitors just poor substitutes.

  25. DIRTY TRICKS • B/Cal and B.A. merger (1988) • B.A.’s internal task force • Operation Barbara • Counter Espionage Campaign • Operation Helpline

  26. OPPORTUNITIES FOR VIRGIN TO GAIN • Extra free PR • Look Clean • Reinvestment

  27. WHAT SHOULD B.A. HAVE DONE INSTEAD • Better PR To Improve Their Image • More emphasis on Quality Service • Ethic Control • Need For One Message

  28. QUESTIONS • Do you think BA were treated fairly when slots were being taken away from them? - How would Virgin feel?

  29. TOWSSTEP 4INTERNAL ENVIRONMENT

  30. CONTROL • Branson-Fields become partners (1984) • Branson buys out Fields (1985) • Sells 10% for £36m in loan equity (1989) • Buys back shares for £45m (1993) • BRANSON HAS TOTAL CONTROL (can develop long term strategy without worrying about shareholders)

  31. MANAGEMENT STRUCTURE • Branson is a leader, he made Virgin with a ‘hands-on’ style of management. However he maintains Virgin Holdings could exist without him. “Virgin is one of the best delegated companies you could come across.” RB. • He has little involvement in anything other than Virgin Atlantic Airways.

  32. THE VALUE OF RICHARD BRANSON • PR mouthpiece & publicity generator • Long term strategist • Role model (for target customers & staff)

  33. EMPLOYEE RELATIONS • Staff get a relatively low wage However Richard Bransons philosophy of ‘making work fun’ means that people want to work for Virgin. Staff feel valued because: • He flies with the crews at least once a month, working with them. • He rewards staff when possible. HIGH MORALE = QUALITY SERVICE

  34. COMPANY WORK ETHIC • When it comes to Management & the Organisation, Branson believes in the Japanese work ethic: going for growth, quality, and creating valuable assets. • He says: “They invest for the long haul and really care for the attitudes of employees.”

  35. BUSINESS OPERATIONS • Growth, quality, creating valuable assets. • Low fixed costs enable Virgin to provide quality services at discount prices. = COMPARATIVE ADVANTAGE

  36. DEALING WITH THE GIANTS! • Despite their comparative advantages Virgin is underthreat from competitors with vast resources. • Protection and opportunities can be obtained from political bodies; - the C.A.A. (Civil Aviation Authority) - E.U. (Treaty of Rome) However, Virgin still has to compete in terms of advertising, developing new technology, and meeting changing demands.

  37. IS SIZE IMPORTANT?

  38. IS SIZE IMPORTANT? “Airlines should be kept small and personal. They should be run like private clubs. we try to manage ours from the bottom up.” “As far as I am concerned in the airline business small is beautiful. Mans instinct to grow must be taken out on other businesses.” “ create the best airline in the world, not the biggest.” Richard Branson

  39. ORGANIC GROWTH Branson intends for Virgin Atlantic to grow organically until it reaches his goal. • Maximum fleet of 20 Boeing 747’s • Servicing 12 cities around the world. “employee satisfaction can only be guaranteed in a company up to a certain size.” • ‘Small & friendly’ cabin teams. • Virgin Pacific???

  40. DESTINATIONS “The 12 most exciting cities in the world” They also happen to be some of the most profitable! By keeping costs low and citing the most profitable routes (no loss leaders), Virgin Atlantic have reasonable margins despite discounting. 3RD MOST PROFITABLE AIRLINE!

  41. IMPROVED ACCESS • Link with Delta Airlines (USA) increased Virgins’ access in the US from 8 to over 200 cities. • This move was seen as vital as it enabled Virgin to remain both independent and competitive in the face of an increasing number of global alliances. - similar link in Australia, Far East???

  42. LIQUIDITYCurrent Ratio = Current AssetsCurrent Liabilities

  43. GEARINGDEBT RATIO = Total Borrowings Capital Employed *100

  44. ACTIVITYNet Asset Turnover = Sales Net Assets

  45. PROFITABILITYR.O.C.E = Operating Profit Sales *100

  46. OPERATING PROFIT MARGIN = Operating Profit Sales *100

  47. MARKETING (PRICE) Strengths • Cut Price Airline • Niche Business Travel Pricing

  48. MARKETING (PRICE) Weaknesses • Marginal Profits • Can be copied by competitors

  49. MARKETING (PROMOTION) Strengths • PR by Richard Branson - Stunts • Brand Awareness • Word of Mouth

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