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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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Business policy presentation for ismo kuhanen

BUSINESS POLICYPRESENTATION FOR ISMO KUHANEN


Mark bentman boyd hargreaves dave horton richard kirk scott morris matt whiting

Mark BentmanBoyd HargreavesDave HortonRichard KirkScott MorrisMatt Whiting


Presentation structure

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


Presentation structure1

TOWS 5

TOWS 6 Strategic Choices

TOWS 7 Consistency testing &

Contingency Planning

Conclusion

B. Hargreaves

B. Hargreaves

B. Hargreaves

M. Bentman

PRESENTATION STRUCTURE


What is tows

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”


Richard branson

RICHARD BRANSON

  • Archetypal Hippy Capitalist

  • Aged 16 Established “Student Magazine”

  • 1979 - Started selling LP's by Mail Order

  • Personal Finance of £800m +


Virgin history

VIRGIN HISTORY


Virgin history1

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


Virgin history2

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


Virgin history3

VIRGIN HISTORY

  • VIRGIN ATLANTIC AIRWAYS

  • The beginning………...


Virgin history4

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


Tows step1 enterprise profile

TOWS STEP1ENTERPRISE PROFILE


The enterprise profile

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)


The enterprise profile1

THE ENTERPRISE PROFILE

  • GEOGRAPHIC ORIENTATION

  • Where are Virgin’s customers?

  • Where are those who should be Virgin’s customers but are not at present?


Tows steps 2 3 external environment prepare forecast

TOWS STEPS 2 & 3EXTERNAL ENVIRONMENT &PREPARE FORECAST


Analysis of external environment

ANALYSIS OF EXTERNAL ENVIRONMENT

  • Economic Factors

  • Social & Political Factors

  • Products & Technology

  • Markets and,

  • Competition


Economic factors

ECONOMIC FACTORS

  • What is a threat to one firm is an opportunity to another as shown by:-

  • Depression

  • Boom


Social factors

SOCIAL FACTORS

Opportunity

  • Consumer Expectancy

    Threat

  • Dependent on one person


Political factors

POLITICAL FACTORS

Opportunities

  • Deregulation

  • Article 86 of the treaty of Rome


Product and technology

PRODUCT AND TECHNOLOGY

OPPORTUNITY

  • Virgin provide a high quality product

    THREAT

  • Technological advance


Markets

MARKETS

Opportunity

  • Franchising

  • Far East Routes

    Threat

  • Franchising


Competition

COMPETITION

Opportunity

  • Effects of Dirty Tricks

    Threats

  • Resources

  • Deregulation


Other factors

OTHER FACTORS

Threats

  • Crashes

  • Terrorists

  • Strikes


Dirty tricks

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.


Dirty tricks1

DIRTY TRICKS

  • B/Cal and B.A. merger (1988)

  • B.A.’s internal task force

  • Operation Barbara

  • Counter Espionage Campaign

  • Operation Helpline


Opportunities for virgin to gain

OPPORTUNITIES FOR VIRGIN TO GAIN

  • Extra free PR

  • Look Clean

  • Reinvestment


What should b a have done instead

WHAT SHOULD B.A. HAVE DONE INSTEAD

  • Better PR To Improve Their Image

  • More emphasis on Quality Service

  • Ethic Control

  • Need For One Message


Questions

QUESTIONS

  • Do you think BA were treated fairly when slots were being taken away from them?

    - How would Virgin feel?


Tows step 4 internal environment

TOWSSTEP 4INTERNAL ENVIRONMENT


Control

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)


Management structure

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.


The value of richard branson

THE VALUE OF RICHARD BRANSON

  • PR mouthpiece & publicity generator

  • Long term strategist

  • Role model

    (for target customers & staff)


Employee relations

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


Company work ethic

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.”


Business operations

BUSINESS OPERATIONS

  • Growth, quality, creating valuable assets.

  • Low fixed costs enable Virgin to provide quality services at discount prices.

    = COMPARATIVE ADVANTAGE


Dealing with the giants

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.


Is size important

IS SIZE IMPORTANT?


Is size important1

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


Organic growth

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???


Destinations

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!


Improved access

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???


Liquidity current ratio current assets current liabilities

LIQUIDITYCurrent Ratio = Current AssetsCurrent Liabilities


Gearing debt ratio total borrowings capital employed 100

GEARINGDEBT RATIO = Total Borrowings Capital Employed *100


Activity net asset turnover sales net assets

ACTIVITYNet Asset Turnover = SalesNet Assets


Profitability r o c e operating profit sales 100

PROFITABILITYR.O.C.E = Operating ProfitSales *100


Business policy presentation for ismo kuhanen

OPERATING PROFIT MARGIN = Operating Profit Sales *100


Marketing price

MARKETING (PRICE)

Strengths

  • Cut Price Airline

  • Niche Business Travel Pricing


Marketing price1

MARKETING (PRICE)

Weaknesses

  • Marginal Profits

  • Can be copied by competitors


Marketing promotion

MARKETING (PROMOTION)

Strengths

  • PR by Richard Branson - Stunts

  • Brand Awareness

  • Word of Mouth


Marketing promotion1

MARKETING (PROMOTION)

WeaknessesRichard Branson is the sole promoter at the moment

  • Not as many promotional resources as competition

  • Statistics could be exposed


Marketing place

MARKETING (PLACE)

Strengths

  • Now in Heathrow & US Cities (Via Delta)

  • Far East


Marketing place1

MARKETING (PLACE)

Weaknesses

  • Too much expansion (places) too quickly

  • Not as much coverage as competitors

  • Difficult to get in to other airports


Marketing product

MARKETING (PRODUCT)

Strengths

  • Innovators

  • Service

  • Quality

  • Family Atmosphere


Marketing product1

MARKETING (PRODUCT)

Weaknesses

  • Difficult to now expand and retain profit

  • Limited number of routes

  • Need to keep ahead of field


Tows step 5 developing alternatives

TOWSSTEP 5DEVELOPING ALTERNATIVES


Alternative strategies

IS IW

EO

ET

WT (mini-mini)

WO (mini-maxi)

ST (maxi-mini)

SO (maxi-maxi

ALTERNATIVE STRATEGIES


Time dimensions

TIME DIMENSIONS

s w

o so wo

t st wt

s w

o so wo

t st wt

Present

PP-T2

s w

o so wo

tst wt

Past

PP-T1

s w

o so wo

t st wt

Time


Interaction matrix

INTERACTION MATRIX

Strength

1 2 3 4 5 6 7 8 9 10

Opportunity

+ + 0 0 0 0 + 0 0 0

+ 0 0 + 0 0 0 + 0 0 0 0 0 + 0 0 0 0 0 +

+ + + + + + + + 0 0

+ 0 + 0 0 0 + 0 0 +

+ + 0 + + 0 + + + +

0 0 0 0 0 0 + 0 0 0

+ 0 0 + 0 0 + 0 0 0

+ 0 0 + 0 0 0 + 0 0

+ + 0 0 + 0 0 0 0 0

1

2

3

4

5

6

7

8

9

10


Alternative strategies applicable to virgin

ALTERNATIVE STRATEGIES APPLICABLE TO VIRGIN


Developing alternatives

DEVELOPING ALTERNATIVES

  • WO (mini maxi)


Developing alternatives1

DEVELOPING ALTERNATIVES

  • ST (maxi mini)


Developing alternatives2

DEVELOPING ALTERNATIVES

  • WT (mini mini)


Developing alternatives3

DEVELOPING ALTERNATIVES

  • SO (maxi maxi)


Tows step 6 stategy choices

TOWS STEP 6STATEGY CHOICES


Strategic choices available to virgin

STRATEGIC CHOICES AVAILABLE TO VIRGIN

  • WT (mini-mini) = RETRENCHMENT

  • WO (mini-maxi) = NO CHANGE

  • ST (maxi-mini) = SPECIALISATION & INNOVATION

  • SO (maxi-maxi = DIVERSIFICATION & JOINT VENTURES


Dynamics of tows analysis

DYNAMICS OF TOWS ANALYSIS

s w

o so wo

tst wt

s w

oso wo

t st wt

Present

PP-T2

s w

o so wo

tst wt

Past

PP-T1

s w

o so wo

t st wt

Time


Tows step 7 consistency contingency

TOWS STEP 7CONSISTENCY & CONTINGENCY


Consistency testing

CONSISTENCY TESTING

  • Is the strategy consistent with the enterprise profile, the present and projected environment, and the resources of the firm

  • Are the strategies in line with Richard Branson as the claimant of Virgin’s organisation

  • Are the strategies in congruence with with Medium and Long Range plans which, in turn can be adjusted from the master strategy


Contingency plans

CONTINGENCY PLANS

  • Have contingency plans have been taken into account that are crucial to the survival and success of Virgin?

  • Yes, already analysed in alternative strategies (see handout)


Conclusion

CONCLUSION

“To be the best airline in the world by the year 2000”


Conclusion1

CONCLUSION

“To be the best airline in the world by the year 2000”

“To be the best airline in the world.”

- through organic growth until Virgin reaches its maximum size (12 destinations serviced by 20 Boeing 747s)


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