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Competitive Advantage: Virgin Atlantic and Ryanair

Keywords: virgin atlantic competitive gain, ryanair competitive advantage

This record analyses how organisations can be strategically led towards success. The report uses the strategic frameworks; the ethnic web, the VRIO construction, the value chain and the 'the three degrees of culture' to recognize how organisations achieve competitive benefits. Virgin Atlantic and Ryanairs strategies are then at the mercy of scrutiny under these frameworks to recognize, the truth is, how this is achieved.

Competitive Edge and distinctive resources;

The reason for strategy is competitive gain. Competitive edge emerges when an organisation enforces a strategy that creates value that is not being attained by its competition (Henry, 2008). The advantage becomes sustainable when rivals cannot mirror the worthiness creation of the strategy. A distinctive resource of an organisation can be explained as a source that cannot be imitated by other organisations (Henry 2008).

Strategic Planning; Perspective, Prices & Mission

A distinct characteristic of a successful organisation is clearness over what's to be performed. A clear goal can enthuse employees, professionals and senior professionals due to the similar values they could share (Scott & Jaff, 1993). A vision is the required state the organisation aspires to perform, values will be the core principles of company and the objective provides reason to why an organisation exists (Kaplan et al, 2008). They need to be clear and concise and easily understood by all levels of the firm.

Carpenter and Porras (1996) emphasised why quality of perspective and mission maintain importance they advised employees who've a better understanding of the mission and vision have the ability to have a larger knowing of the organisations strategy and exactly how it is executed. Secondly a conclusion is directed at personnel of how strategy helps achieve the eyesight and quest of the organisation. Finally they offer instruction to strategy development as they guide the strategy which guides the company.

Values create the foundations of the organisation; what the business promotes of their working culture can greatly impact decisions on every level thus a company's strategy for the future will be formed around these primary concepts and values. They allow the development of the organisation's goal; the fundamental reason for existence.

Case Example: Ryanair & Virgin Atlantic

Virgin Atlantic and Ryanair are successful air travel companies who achieve competitive benefit in various ways.

Ryanair is a focused low cost airline who offers a no frills service to customers. The strategy of Ryanair is to be a cost innovator. The purpose of Ryanair is therefore to give a cheap, no frills airfare service that is profitable.

Vision, Value and quest of Ryanair

Vision

To offer low fares that create increased passenger traffic while keeping a continuous focus on cost-containment and operating efficiencies.

Values

Cost useful = low fares & low costs.

Mission

To firmly create itself as Europe's leading low-fares planned passenger flight through continued improvements and widened offerings of its low-fares service.

Source: http://www. ryanair. com/doc/investor/Strategy. pdf (2013).

Ryanair measures its success through earnings. Ryanair noted a hop in revenue towards the finish of 2012 which indicates that Ryanair is obtaining its goal (http://www. bbc. co. uk/news/business-20202579).

Virgin Atlantic is a leisure airline who is able to diversify into strange leisure routes and provide different demographic locations to Ryanair. The entire purpose of Virgin Atlantic is therefore to expand a profitable air travel that focusses on business and leisure market segments and the grade of service offered whilst empowering personnel.

Vision, Value and Quest of Virgin Atlantic

Vision

The success of your three calendar year strategy requires us to make on these foundations by focussing on the business enterprise and leisure market segments and travelling efficiency and success.

Values

Caring, honest, value, fun, advancement.

Mission

To grow a profitable airline where people want to fly and people love to work.

Source: Virgin Atlantic (2013)

Virgin Atlantic measures it success through feedback from both staff and customers through effective feedback systems including 360 degree feedback. The opinions received is often positive and shows Virgin Atlantic is achieving its reason for providing an airline where people love to journey and staff want to work (Virgin Atlantic, 2013).

The above good examples demonstrate how eyesight, values and mission statement underlie the goal of an organisation and how merging the three jointly form the foundation of strategy.

Ryanair

The first company to be considered is Ryanair and how it achieves its cost innovator position by looking at its culture in conditions of the three levels of culture platform and through the use of the value chain to analyse the way they integrate the circulation of activities to accomplish competitive advantage

Culture and its own connection to strategy

Schein (1988) described organisational culture as a routine of basic assumptions confirmed group has created by understanding how to take care of problems of inside integration and exterior adaptation. Culture is created through the actions of top level management in relation to what they take precedence to, what they concentrate on and what behaviours they punish or praise. Hall (1993) recommended culture can be viewed as an intangible resource that can be classified as a secured asset or competency contributing to an organisations sustainable competitive benefits as culture can prevent a strategy or make a technique excel.

Scheins (1988): three degrees of culture

Hatch (1993) described the model as a conceptual framework for intervening with and analysing inner organisational culture. Schein (1988) identified culture as three levels categorised into:

Artifacts

Espoused Values

Basic Underlying Assumptions.

They show how deeply values and beliefs are inserted into an company. The model shows the amount to which culture is visible to an company and results in a knowledge of the way business process are carried out and what can be done to assist change within an organisation. It is employed to diagnose social characteristics of your organisation which can then be used to develop or maintain Strategy and the strategic benefit that ensues. The desk below summarises each level of culture;

Three Degrees of Culture

Artifacts

The most observable level of culture and can include business process, aesthetics of the organisation or organisational buildings for example. Each is visible indicators of culture but are difficult to interpret.

Espoused Values

They underlie behaviour and can, somewhat, determine behavior. They aren't directly observable and can include strategies, goals & goals or philosophies for example.

Basic Fundamental assumptions

These assumptions are unconscious and often stem from ideals until they are overlooked and transfer to the unconscious.

Source: Williams (2012).

Ryanair 3 degrees of culture;

The culture of Ryanair is cost efficiency which is reflected in their worth, vision and objective where they create their main competitive advantage of being a low priced, frill free air travel.

Using the framework a diagnosis can be produced of the culture of Ryanair and how this creates competitive advantage;

Ryanair; Three degrees of Culture

Artifacts

No complementary services are offered at Ryanair; this shows cheap culture as instead they sell secondary services on airfare.

Head office staff supply own pens and are not allowed to fee their phones at work in the office, reflective of low priced culture.

Employees pay for their own training and outfits.

Ryanair use subsidiaries to make fares cheaper, they can be from using local international airports so the cost savings can be handed onto customers.

Espoused Values

The policies enforced by Ryanair's senior management, e. g. the insurance plan of having to buy own even/ stationary equipment, demonstrates cost efficient characteristics.

Basic Main assumptions

Embedded recommendations in Ryanair; personnel & employees deliver a cost efficient service to individuals plus they know that they are getting a frills free airfare where the expectation of other airlines is to get complimentary services.

Source: Ryanair (2013).

The three degrees of culture demonstrate the way the strategy of cost leadership is built into the culture of Ryanair culture so it becomes an unconscious process from personnel and an expectation of customers.

The Value string.

The value chain was initially characterised by Porter (1985) and is a string of activities that group along the key value adding activities of an organisation and can be utilized as a tactical planning tool. Porter (2007) referred to an organisation as a compilation of individually distinct, interrelated, monetary activities which include both most important and supplementary activities. The value chain assists as a guide for identifying the main element activities in a organisation which make up the worthiness chain that contain the potential to create a sustainable competitive benefits. The competitive gain emerges from the ability of the organisation to perform identified activities in the value chain in a superior way to competitors.

Source: Williams (2013).

The value chain is split into primary activities and extra activities which need to linked together strategically over the company so resources can be optimised and coordinated in a way to maintain competitive advantage. Principal activities are activities categorised as products or marketing related activities. Support activities assist the primary activities you need to include infrastructure, human reference management, procurement and technical development.

Value String of Ryanair

The Value string of Ryanair is a demonstration of how they integrate both principal and support activities together to set-up competitive advantages;

Table of support Activities which add value to Ryanair;

Support Activity

Description

Infrastructure

Ryanair's Head Office buildings are minimal

Human reference Management

Management control, limited training, Low amount of staff

Technology development

Internet booking system, Low technology marketing, Internet sales, Integration of systems

Procurement

Outsourcing, low costs & alliances

The support activities defined show how to accommodate the primary activities in a manner that is affordable. For instance, Ryanair's point of deal is internet based, cutting out the center person so airfare bookings go directly to Ryanair themselves.

Table of Most important Activities which add value;

Primary Activity

Description

Inbound logistics

Quality training, Low priced suppliers, Airport terminal agreements

Operations

No added frills (low cost. )

Outbound logistics

Fast turnaround times of aircraft, reliable service

Marketing & Sales

Low cost special offers, Free publicity, Internet sales, controversial

Services

Limited resources and incredibly basic

Throughout the worthiness string, each activity is based around cost efficiency. Money is saved through;

Providing a basic service to customers

Using the internet as a spot of deal which incurs lower costs as less individual capital is needed

Instilling a cheap attitude in personnel through managing personnel in a cheap manner by reducing overheads on training, uniform and fancy offices

Ensuring there technology and logistics are designed around time efficiency guaranteeing maximum consumption of build and guaranteeing services they offer are reliable.

Source; Ryanair (2013).

Virgin Atlantic

Virgin Atlantic has a reputation of quality, whether it's quality in conditions of service, treatment of staff or the design of the genuine aircraft. The cultural web will be used to recognize how culture contributes to competitive benefit of Virgin Atlantic and how its resources are distinctive to people of its competitors.

Cultural Web & Strategy

Corporate culture and reputation are significant, intangible resources of an company that can create ecological competitive benefit. The cultural web is a diagnostic tool that talks about the internal environment of the organisation aligning strategy with culture Johnson (2000). Seel (2000) identifies the cultural web as six interrelated elements centred round the paradigm (the organisations main perception) which constitutes as the work environment. The paradigm is set up on collective activities and informs what people in the company do and has impact over how change should be responded to. Stories, symbols, ability structures, organisational structures, control system and ritual & exercises will be the six elements that make up the web and will be the focus of proper change. Each one of the elements must be analyzed in order to find knowledge of an organisations culture (Johnson, 1992). Organisational culture needs to inspire innovation and therefore although culture must be embedded within an organisation it needs to also be versatile in order to accomplish sustainable competitive benefits.

Cultural web of Virgin Atlantic

The paradigm of Virgin Atlantic is shown in their mission statement; to expand a profitable flight where people want to work and people love to travel. The core idea of Virgin is delivering quality experience.

Stories; Most reports require Richard Branson (the creator of the virgin brand) and frequently relate with his personality or management style and portray him as an anti-corporate, impressive hero.

Rituals; Virgin Atlantics head office are spacious, have a slow paced life and when staff reach training milestones they and their families are asked to a meeting which is often attended by Branson himself.

Power Buildings; Most decisions and visions are handled by a motivated, close knit group of senior executives

Organisational structures; Small, focussed groups that work to keep a tiny company mentality inside a big company.

Control; Financial and performance email address details are displayed for everyone to see motivating and empowering personnel for taking responsibility because of their performance.

Symbols; Branding is smart and slick and conveys the nice reputation that the brand Virgin has.

Source: Virgin Atlantic (2013)

The ethnical web shows how the six elements connect to one another creating the primary notion of quality and creativity.

The VRIO framework

Barney (1997) described proper resources as; valuable, unusual, inimitable and organisable. The VRIO framework is an instrument an organisation can use to examine its inside environment and views organisations as bundles of resources. If these resources are correctly used then an company can gain competitive gain over competitors depending on four characteristics discovered by Barney (1997) and establishes whether the edge is momentary or ecological.

O'riordian (2006) detailed four questions that require to be asked when determining an organisations resources and features;

How valuable is the resource?

How unusual is the source of information?

Can the learning resource be imitated?

Is the source organised in an productive manner?

If the answer is 'yes' to the aforementioned questions then the learning resource offers a competitive benefits over opponents.

When analysing an organisations resources one of the following answers happen (Barney 1997);

If an organisations tool is not valuable then the firm can get to be at competitive disadvantage

If the source of information is valuable however, not rare competitive parity is reached

If the source is valuable however, not uncommon a competitive gain is reached but it could only be temporary.

If a companies resources are uncommon, valuable however, not costly to imitate then momentary competitive benefits results.

If the resources of an company are valuable uncommon and costly a sustained competitive gain will result if the resources are organised properly.

VRIO platform of Virgin Atlantic

Virgin Atlantic has lots of resources that help sustain its competitive edge over competitors. Its brand and reputation are indisputably its strongest source whereas its customer service, geographic location (in conditions of flight destinations) and recruiting are a competitive advantage now, but have the chance of being imitated in the future.

VRIO Platform of Virgin Atlantic

Resource

Value

Rarity

Inimitability

Organised

Competitive Implications

Virgin Brand

Y

Y

Y

Y

Sustained competitive advantage

Finance

Y

Y

Y

Y

Sustained competitive advantage

Reputation

Y

Y

N

Y

Temporary Competitive Advantage

Customer Service

Y

Y

N

Y

Temporary Competitive Advantage

Geographic location

Y

Y

N

Y

Temporary Competitive Advantage

Technology

Y

Y

N

Y

Temporary Competitive Advantage

Human resources

Y

Y

N

Y

Temporary Competitive Advantage

Source: Virgin (2013)

The VRIO framework for Virgin Atlantic shows that competitive advantage is gained from there resources that are valuable, rare, inimitable and organised. The brand name Virgin and the ability the name has to raise capital anticipated to Virgins reputation are the resources that ensure sustainable competitive advantages is achieved. Technology, the positioning of where plane tickets are available to and from and the organisational structure of Virgin are resources that can create competitive gain but have the opportunity of being imitated by competition which means the benefit may only be temporary.

Conclusion;

By checking out the strategies of both Virgin Atlantic and Ryanair it is clear that different strategic routes can be taken to achieve competitive benefits. Both organisations use their resources effectively to accomplish their goal. Competitive advantage is approximately creating and sustaining superior performance (Porter, 1998). Looking to the future Flight companies will be have to face rising fuel prices and an increasing demographic of consumers who've less throw-away income. This could propose difficulties to both organisations. Ryanair give attention to cost efficiency, however, if fuel prices were to rise substantially they would have to consider ways that they can continue to deliver there no frills airfare service at competitively low price. With regards to Virgin Atlantic they would have to focus on the consumer with less disposable income by considering how they could improve the efficiency of its functions and activities to charm to this audience. There is no right way of building a strategy as not one applies to every organisation. The most effective strategies are the ones that meet up with the needs of the organisation accessible.

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