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Marketing Management

INTRODUCTION

The assignment focuses on analyzing and comparing two companies which belong to same
sector or industry with a marketing angle. The purpose states that the study of the module
Marketing Management needs to be implemented in virtual front by providing thoughtful process
to the company chosen and revise the value proposition. The assignment is divided into step-by-
step parts towards preparing a plan for the organization under study.

Question 1. Select two companies in the same sector/industry.

Answer: The requirement of the question speaks about the two companies to be selected of the
same industry which can be compared on various aspects particularly marketing strategy on a
global scale; I have chosen the following two companies:

1. British Airways

2. Virgin Atlantic airways

The reasons for selecting these companies are:

a) The value proposition of both the companies can be compared and differentiated based
on there marketing assets.

b) Both the companies are intense competitors in the airline industry in providing superior
customer service.

British Airways- Company profile

British Airways Plc, along with its subsidiaries, is engaged in the operation of international and
domestic scheduled air services for the carriage of passengers, freight and mail and the provision
of ancillary services. The Company’s principal place of business is Heathrow. It also operates a
worldwide air cargo business, in conjunction with its scheduled passenger services. The
Company operates international scheduled airline route networks together with its code share and
franchise partners, and flies to more than 300 destinations worldwide. During the fiscal year
ended March 31, 2009 (fiscal 2009), the Company carried more than 33 million passengers. It
carried 777,000 tons of cargo to destinations in Europe, the Americas and throughout the world.
In July 2008, the Company’s subsidiary, BA European Limited (trading as OpenSkies), acquired
the French airline, L’Avion.

Virgin Atlantic Airways- Company Profile

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Virgin Atlantic Airways Limited (operating as Virgin Atlantic) is a British airline owned by Sir
Richard Branson's Virgin Group (51%) and Singapore Airlines (49%). It is headquartered in
Crawley, West Sussex, England, near London Gatwick Airport. It operates between the United
Kingdom and North America, the Caribbean, Africa, the Middle East, Asia, and Australia from
main bases at Gatwick and London Heathrow Airport, using a mixed fleet of Airbus and Boeing
wide-body aircraft. The company holds a CAA Type A Operating License to carry passengers,
cargo, and mail on aircraft with 20 or more seats. In the year to February 2009, Virgin Atlantic
carried 5.77 million passengers and made an annual profit of £68.4 million on turnover of £2,580
million.

Question 2. Analyze, evaluate, compare and contrast their mission statements, value;
comparative differentiation, position and marketing assets.

Answer: On a preliminary note it is important to understand the concepts of Mission and Vision
for a particular organization.

According to Wikipedia- The Free Encyclopedia a Mission is defined as the fundamental

purpose of an organization or an enterprise, succinctly describing why it exists and what it does
to achieve its Vision.

While a Vision is defined as the desired or intended future state of an organization or enterprise
in terms of its fundamental objective and/or strategic direction. Vision is a long term view,
sometimes describing how the organization would like the world in which it operates to be.

Definition of Mission Statement by Alan Gleeson describes it as the essence or purpose of a

company – what it stands for i.e. what broad products or services it intends to offer customers.
The mission statement also gives readers a window on the raison d’être of the company and was
initially designed as a means by which potential shareholders and investors could understand the
purpose of the company that they were considering investing in.

“Wikipedia- The Free Encyclopedia” defines Mission statement as “a formal, short, written
statement of the purpose of a company or organization.” The mission statement should guide the
actions of the organization, spell out its overall goal, provide a sense of direction, and guide
decision-making. It provides "the framework or context within which the company's strategies
are formulated." Historically it is associated with Christian religious groups; indeed, for many
years, a missionary was assumed to be a person on a specifically religious mission. The word
"mission" dates from 1598, originally of Jesuits sending ("missio", Latin for "act of sending")
members abroad.

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Definition of Vision statement by “Wikipedia- The Free Encyclopedia” outlines what the
organization wants to be, or how it wants the world in which it operates to be. It concentrates on
the future. It is a source of inspiration. It provides clear decision-making criteria.

The difference between Mission and Vision statement is a Mission statement contains the
information of the company in a nutshell about its products and services to customers while a
Vision statement offers the future perspectives of the company or organization, the purpose or
broader goal for being in existence or in the business.

Mission and Vision Statements of the British Airways and Virgin Atlantic is discussed
below:

Mission statement of ‘British Airways’-

There is no official mission statement from the company’s website instead the social blogs have
various statements out of which the best one chosen “To be the undisputed leader in world travel
for the next millennium”

Vision statement of ‘British Airways’- “The World’s Favourite Airline”

Mission Statement of ‘Virgin Atlantic’-

“Safety, security and consistent delivery of the basics are the foundation of everything we do.”

Vision statement of ‘British Airways’- “To grow a profitable airline, where people love to fly
and where people love to work”

Analyzing the Mission and Vision statements

The mission and vision statements of British airways seems to be in the line of business as both
focus on world class operations not just local or domestic functioning, hence it is recommended

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that being a company which caters large scale audience/customers British Airways has to focus
on its principles of functioning to achieve its vision. As far as Virgin Atlantic is concerned,
nowhere it mentions about the functioning and catering the audiences of the world, it is known
fact that Virgin Atlantic is more of a British nature and caters or prefers services priority to
British audiences hence it needs to change its mission and vision statement which though is
appealing but doesn’t come in the line of business.

Question 3: Benchmark the two companies.

Answer:

Benchmarking is the process of comparing one's business processes and performance metrics to
industry bests and/or best practices from other industries. Dimensions typically measured are
quality, time, and cost. Improvements from learning mean doing things better, faster, and
cheaper.

Benchmarking involves management identifying the best firms in their industry, or any other
industry where similar processes exist, and comparing the results and processes of those studied
(the "targets") to one's own results and processes to learn how well the targets perform and, more
importantly, how they do it.
Mission and Vision Statements and Customer (Client) Surveys are the most used (by 77% of
organisations) of 20 improvement tools, followed by SWOT analysis(72%), and Informal
Benchmarking (68%) for benchmarking.

Through SWOT analysis one can benchmark one company with other.

SWOT Analysis of British airways:

Strengths:

• Strong brand name and brand image

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• Good reputation

• Size and scale of BA

• BA Key Messages – consistency; reliability; quality of offering

• BA is the largest airline and flag carrier of the United Kingdom

• British Airways' strategy and aircraft purchases are seen as an industry leader
"benchmark" that influences other carrier's decisions

• Airline Franchising / Partners & Alliances - oneworld® partner airlines

• Technological Innovation

• Social and Environmental performance

• Outsourcing or disposal of services

Weakness:

• Lack of marketing strategy to win customer loyalty

• Cost-cutting by reducing jobs (moral/de-motivation)

• Differentiating on price with LCC’s

(Low Cost Carrier)

• Lower fares due to high competition

• Downturn in passenger demand

• Insufficient hedging for future fuel needs

• BA may have shifted its emphasis from a market-led approach to an asset-led approach

• Cutting flights to the US and the Middle East

Opportunities:

• ‘One-world alliance’ Terminal 4

• Heathrow – BA Terminal 5

• 2012 Olympics Official Airline

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Threats:

• BA Connect sold – loss of Market opportunities/segments.

SWOT Analysis of Virgin Atlantic:

Strengths:

• Established and highly-recognizable brand image / brand name

• Best online reputation

• Differentiation based on value, service, and price

• The second largest long haul airline in the UK and the third largest European carrier over
the North Atlantic

• Innovative features that distinguish the company name

• Strong, well-designed organizational structure

• Strong leadership development programme

• Talented management team lead by Richard Branson

• Universal appeal to wide variety of customers

• Customer loyalty

• The most child-friendly airline

Weakness:

• Ineffective utilization of alliances and partnerships

• Marketing primarily focused on London market

• Some underdeveloped channels – Example: Premium Economy

• Underdeveloped distribution system

• Relatively small aircraft fleet

(38 airplanes)

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• Limited destinations

Opportunities

• Alliances and mergers (the future of the industry)

• Airline growth post-recovery because of the trimming of the airlines since 2000

• No preferential landing slots in Heathrow Airport

Threats:

• No preferential landing slots in Heathrow Airport

It is to be noted that each company in its sector or industry has common opportunities and threats
which can be discussed as follows

Common opportunities:

• “Open Skies” opportunities

• 280 airports within Europe (growth opportunity)

• High demand for flights

• Increased tourism with the improvement of the economy

• Latin America as a low-terror, high growth potential market

• No major carriers dominating Intra-EU aviation market

• Germany, Spain, and France (next largest markets after UK)

• Asian market expectation (fastest growing over the next ten years)

• Air services within the European Union were fully deregulated and liberalised

Common threats:

• Economic weakness

• Low-fare airline companies / Price competition

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• Competitors – both LCC’s (Low Cost Carriers) and Legacy Carriers

• Middle East developments / Terrorism leading to decreased tourism and confidence in the
airlines / Less demand due to 911

• Increase in expenses (Insurance costs/security costs)

• Higher Expense – Fuel

• Environment concerns: EU Carbon Trading for aviation industry; Future tax on aviation
fuel

• Regulation problem for airlines aiming to merge or grow (i.e. antitrust legislation)

• On-going supply surplus resulting in maintained low revenues

• Improved telecommunications (i.e. video conferencing) decreasing business travel

• Internet booking allowing greater price transparency

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Virgin Atlantics Airways British Airways

Founded 1984 1924

Parent Company Virgin Group British Airways plc

Virgin Group 51%, Singapore

Owner n/a
Airlines 49%

Crawley, England, United

Head Office London, United Kingdom
Kingdom

London Heathrow Airport London Heathrow Airport

Hubs
London Gatwick Airport London Gatwick Airport

Alliance ANA Oneworld

Number of
As of Aug 2009 / 48 As of Sep 2009 / 265
Aircrafts

Destinations 30 222

Target Market Upper class and economy class Upper class

Richard Branson (President)

Management Stephen Murphy (Chairman) Willie Walsh (CEO)
Steve Ridgway (CEO)

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Question 4: Produce a thoughtful and substantiate revised value proposition; define new mission
statement; new markets; revised comparative differentiation and how the brand should be
changed.

Answer: The mission statement is the key to success and delivering the customer needs on a
short term notice and it needs to be changed every year preferably. We now discuss the
developing of a mission statement, developing vision statement and value statement.

Mission Statement of Virgin Atlantic

Safety, security and consistent delivery of the basics are the foundation of everything we do.

The success of our three year strategy requires us to build on these foundations by focusing on
the business and leisure markets and driving efficiency and effectiveness.

Mission 1. To grow a profitable airline...

Latest award: Best Long-Haul Airline 2009 - Sunday Times Travel Magazine Readers
Awards 2009
Leading Transatlantic Airline - World Travel Awards 2009

Mission 2: Where people love to fly...

Developing a Mission Statement

1. Basically, the mission statement describes the overall purpose of the organization.

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2. If the organization elects to develop a vision statement before developing the mission
statement, ask “Why does the image, the vision exist -- what is it’s purpose?” This
purpose is often the same as the mission.
3. Developing a mission statement can be quick culture-specific, i.e., participants may use
methods ranging from highly analytical and rational to highly creative and divergent, e.g.,
focused discussions, divergent experiences around daydreams, sharing stories, etc.
Therefore, visit with the participants how they might like to arrive at description of their
organizational mission.
4. When wording the mission statement, consider the organization's products, services,
markets, values, and concern for public image, and maybe priorities of activities for
survival.
5. Consider any changes that may be needed in wording of the mission statement because of
any new suggested strategies during a recent strategic planning process.
6. Ensure that wording of the mission is to the extent that management and employees can
infer some order of priorities in how products and services are delivered
7. When refining the mission, a useful exercise is to add or delete a word from the mission
to realize the change in scope of the mission statement and assess how concise is its
wording.
8. Does the mission statement include sufficient description that the statement clearly
separates the mission of the organization from other organizations?

Changing Value Propositions to Escape the Commoditization Trap

How do value leaders escape the commoditization trap? They escape by reinventing their value
propositions. Value propositions define how items of value (product and service features as well
as complementary services) are packaged and offered to fulfill customer needs. To understand
how firms can change their value propositions, we first need to define the concept of a value map
and value Frontier. A value map defines the relative position of different companies in an
industry along the cost performance axis. The value frontier defines the maximum performance
currently feasible for any given cost (to the customer), and represents the different segments
offered to customers. Successful market leaders create unique positions on the value frontier.
However, if all the competitors converge toward a similar point on this frontier, the industry
faces commoditization and potentially reduced margins.

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Figure 1: A value space map for the airline industry

Defining the Key Value Propositions and Value Frontier

The first step in the process is to define the value frontier. This is fairly easy to do. Managers
must first identify what their competitors offer in terms of performance and cost. A value frontier
extends from low-cost substitutes to fulfill a specific need (automobile or railway vs. aircraft) to
high-end embellishments that are currently offered at high prices and define superior
performance. Thus, we ask managers to consider ways of fulfilling core needs beyond the ways
currently offered in their industry segment. This is a critical first step in identifying new
strategies.
Once the value frontier is defined, what are the value propositions of the companies along the
frontier? What are the performance, price, risk and effort attributes across customer roles that
define the companies on the frontier? Defining the value proposition of different locations on the
frontier allows managers to elicit key attributes for differentiation. It also forms the basis for
comparing the companies value propositions vis-a-vis competitors.

Creating New Value Propositions and Changing the Frontier

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In order for a company to move to an unique position on the value frontier, it must change its
strategies. Value propositions can be changed along three dimensions (cost, performance, and
customer roles) to achieve one of the three strategies which alter positions on or of the value
frontier (extending toward the low-end, toward the high-end, and shifting the frontier).
First, a company must identify which of the three strategies is appropriate. Extending the frontier
toward the low-end is worthwhile if the low-end frontier point in a specific industry can compete
with the high-end point in another industry (e.g., low-cost air travel competing with buses) or if
customers would be interested in a product/service of lower performance at a lower price.
Extending the frontier toward the high-end can be considered when the high-end in a specific
industry can compete with the low-end point in another industry (e.g., high-quality prepared
pasta competing with restaurants) or when there are customers willing to pay for more
performance than what is currently available. If neither option makes sense, then shifting the
frontier is the only alternative. This has traditionally been the basis of market competition.
Changing value propositions to achieve such frontier changes rely on changing one or more of
the three dimensions. Managers need to think of innovating ways to reduce price, risk, and effort,
as well as to address the multiple roles customer play, such as having customers co-create some
of the work. We have given numerous examples of these, so now we will focus on transforming
product performance by suggesting generic ways of changing product/service attributes.
Value can be enhanced by adding or removing three of the four attributes. The first level (basic
attributes) usually can not be modified, as it represents the attributes without which the product
or service doesn't make sense. We can therefore identify three ways of altering attributes: reduce
expected attributes, add attributes to fulfill desired needs, and elicit and deliver attributes to serve
unanticipated needs.
Expected attributes represent the common wisdom within an industry, the rules of the game.
They usually frame the thinking of managers looking for ways to distinguish their
product/service. Some innovators have been successful at delivering only part of these attributes,
the ones valued most by their customers. They focused on their core strengths and outsourced the
rest to other suppliers, or directly to the customer. For example, in the airline industry, Southwest
Airlines realized that its customers basic needs did not include perks such as food, assigned
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seating, or interline baggage handling. By reducing the level of service, and designing a business
model that efficiently and successfully delivered the basic attributes that mattered to customers
(cheap air travel, frequent departures, on-time arrivals), Southwest is the most successful airline
in recent years.
Desired attributes are those most often already delivered in another customer segment, but
unreachable at the price point of customers who also desire them. Technological innovation is
the most common lever for bringing down the price points to deliver such attributes to a new
market segment. For instance, Virgin Atlantic started providing individual color screens to every
economy class passenger when matrix display technology got advanced enough to lower the
costs sufficiently. One way to elicit these attributes is to find out what performance level
customers would ask for if they had unlimited resources. What service could be delivered to
them? And are there any ways to provide some of these services at a more reasonable price (e.g.
British Airways adding beds to airplanes)?

Question 5. Prepare the plan to implement the revised value proposition, analyze and
substantiate?

Answer: Using Piercy’s Value Proposition Model the above question can be solved

Piercy (1997) identifies 4 relationships to be considered when managing market-led

organizations.

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Figure 1.1: Key relationships in market strategy (Source: based on Piercy, 1997)

He identifies the key relationship-marketing issue as the refocusing of marketing effort: moving
activities away from a marketing mix that creates a series of one-off transactions, to managing a
complex network of relationships involved in the production of the whole consumer offering.

CONSUMER ANALYSIS

The first jetliner was introduced in 1959, but air travel was quite expensive and only the very

wealthy or business people who worked for very profitable companies, were able to fly. Today,

the airline industry has consumers from every demographic group. Virgin Atlantic customers are

typically passengers who expect more out of their airline and are willing to pay the price for

luxury. Apart from the financial restrictions, Virgin Atlantic carries approximately 4 million
1
passengers annually who come from a wide array of social backgrounds. Due to the fact that

Virgin Atlantic is a British company, about 60 percent of the passengers are comprised of British

citizen.

1 Datamonitor: Virgin Atlantic, November 2006, pg. 5.

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Virgin Atlantic segments their passengers into two main categories: Upper Class and

Economy Class, with the latter further segmented into a Premium Class and Regular Economy

Class, consisting of regular economy fare and coach fares. The premium class includes a separate

economy cabin for full fares with an option to pay extra for chauffeur driver cars and clubhouse

lounges. The Upper Class is generally comprised of males between 35 to 45 years of age and that

earn more than $75,000 a year. The Premium Economy is used evenly by business and vacation

travelers, typically around 40 years of age.

Although one might assume that the consumer of Virgin Atlantic is simply buying a

space on an airplane, this is not true. The customer of Virgin Atlantic is interested in the entire

flying experience offered specifically by this company. An important feature that Virgin

Atlantic offers its customers is the Special Assistance program that enables the traveler to

customize their travel from the start by arranging transportation to the airport, selecting their

onboard meals and having transportation at the destination. Though limited to British fliers, a

vacationing consumer is able to purchase a Virgin Holiday package ranging from family

holidays, beach holidays, city breaks, Disney holidays, Flydrive or ski holidays.2

With the widespread use of the internet, more and more people are buying their tickets

online directly from the airline’s website www.virgin-atlantic.com. Another option is to call the

customer service line at 800-821-5438. For consumers who prefer to go through an intermediary,

they can opt to hire a travel agent to book their flight and handle any other necessary

arrangements to make the travel experience enjoyable and stress-free. Virgin Atlantic consumers

2 http://www.virginholidays.co.uk/info/holiday_information/
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use the company’s services year round but during the summer season, the number of travelers is

greatly increased. As stated by the International Air Transport Association (IATA), the number

of international air passenger number rose by 5.9 percent in 2006 and predicts that totals in air

travel will further increase in 2007, despite rising gas prices.3

There are many competitors in the airline industry. Consumers have a wide range of

options to choose from to accommodate their lifestyle; whether it is a monetary restrictions or

preferences such as comfortable seats at a higher price. The following perceptual map indicates

the location in the consumers mind how Virgin Atlantic is viewed in comparison to competitors.

The following table contrasts these two types of marketing.

Transactional marketing Relationship marketing

Focuses on single sales Focuses on customer retention

Oriented to product features Oriented to customer value

Short timescales Long timescales

Little emphasis on customer service High customer service emphasis

Limited customer commitment High customer commitment

Moderate customer contact High customer contact

Quality is primarily the concern of the

Quality is the concern of all
production/service department

3
http://money.cnn.com/2007/11/13/news/companies/airline_fuel_fares/index.htm

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The four key relationships identified by Piercy occur in both manufacturing and business
organisations, and include networks of business systems, supply chains and virtual networks all
working together to create the value proposition for the customer.

“Suppliers, shareholders, customers and employees are not rivals for the battle for profits – they
are partners, and will be more successful once they learn to work together.” (Egan and Thomas,
1998)

Bibliography

• Company Profile of British Airways:

(Source: http://uk.reuters.com/business/quotes/companyProfile?symbol=BAY.L )

• Company Profile of Virgin Atlantic:

(Source- http://en.wikipedia.org/wiki/Virgin_Atlantic_Airways)

• Mission Statement- Definition

(Source: http://en.wikipedia.org/wiki/Mission_statement)

(Source: http://articles.bplans.co.uk/writing-a-business-plan/mission-statement/367)

• How to develop Vision statement

(Source- http://managementhelp.org/plan_dec/str_plan/stmnts.htm)

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• Reinventing Value Propositions

(Source: http://archive.nyu.edu/bitstream/2451/14205/1/IS-96-21.pdf Working Paper

Series Stern #IS-96-21 by Ajit Kambil, Ari Ginsberg, Michael Bloch, 1996)

• Developing Mission, Vision and Value Statement

(Source : http://openlearn.open.ac.uk/mod/resource/view.php?id=210429 )

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