Essay: How strategic planning works for Virgin Airline

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  • How strategic planning works for Virgin Airline
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Introduction
This report will be focusing on how strategic planning works for Virgin Airline as an organisation. This is going to concentrate on missing, vision, objectives, goals and competencies of Virgin Airlines. The process of strategic planning is the key for successful implementation of an organisation.
Strategy is the direction and scope of an organisation through its configuration of resources within a challenging environment to meet the needs of markets and to fulfil stakeholders’ expectations. This is a summary of how business plans achieve their goals, improves and sustains its position in an organisation.
1.1) Assessment of business missions, visions, objectives, goals and core competencies that inform strategic planning
Virgin Atlantic is an airline company that first opened its doors to the public in the year 1984 with Richard Branson being the sole owner and Chief Executive Officer. In 2o12 the company carried over 5.4 million passengers making it the seventh-largest UK airline in terms of passenger volume and according to Virgin Atlantic report in 2014, £14.4 million pre-tax profit was realised in December 2104.
Virgin Airlines began from Boeing Aircraft and make a strategic improvement to be unique from other Airlines by making its own Aircraft sit roomier, having TV altered for every client with choice of channels and diversions. The company made procurement for top travellers by rendering special pick up service from their home to the Airport. VIP lounge and high quality drinks to make them comfortable as possible. All these help the company to achieve higher passenger capacity compare to its competitors.
• Vision statement
The vision statement includes organizational values, and gives directions for employee behaviour and helps provide inspiration. Strategic plans may require a marketing strategy, which could include the vision statement to also help inspire consumers to work with the organization. Virgin Atlantic’s vision statement is:
➢ To fulfil the potential demand of the customer and make their journey comfortable and also set the standards for others in the airlines industry.
• Mission statement
A mission statement clarifies the purpose and primary, measurable objectives of an organization. Strategic plans may involve changing the mission statement to reflect a new direction of the organization. Strategic planning will most likely have its successes and failures. The mission statement will help measure whether the strategic plan aligns with the overall goals of the organization. Virgin Atlantic’s mission is:
➢ To grow a profitable airlines
➢ Where people love to fly
➢ Where people love to work.
• Goals and objectives of the airline
In the strategic planning context, a goal is where the organization wants to be, or its destination. An organization may set several goals that will outline a path to achieving the vision. Objectives are a measure of change in order to bring about the achievement of set goals. A number of goals must be attained before the strategic plan can be achieved. Similarly, each goal in the strategic plan will in turn require a number of objectives to be successfully achieved. The goals and objectives of Virgin Atlantic are:
➢ To make a profit to keep shareholders and customers happy so that they will still invest and therefore the company can still expand.
➢ To expand the business to more destinations worldwide
• Core competencies
The core competence theory is the theory of strategy that prescribes actions to be taken by an organization to achieve competitive advantage in the marketplace. The concept states that an organization must play to its strengths or those areas or functions in which it has competencies. The theory also defines what forms a core competency and this has to do with it being not easy for competitors to imitate, it can be reused across the markets that the organization caters to and the products it makes, and it must add value to the end user or the consumers who benefit from it. An organization must therefore orient its strategies to tap into core competencies because these competencies are the fundamental basis for the value added by the organization. Virgin Atlantic’s core competency is Richard Branson and the employees of the airline. His charismatic style has proved to be an asset to the organization which no other organization possesses. Virgin Atlantic’s brand name and corporate culture are also core competencies.
1.1) Factors to be considered when formulating strategic plans
Organizations develop strategic plans by carefully creating a vision of their future and the strategies needed to get there. Many of them however fail to realize their vision and fail to deliver the expected strategic results, and their executive teams cannot usually pinpoint the reasons for this problem so they keep repeating the planning cycle, hoping they will get better results. The factor that could hinder the success of strategic plans could be internal or external factors.
Internal and External factors
The internal business environment includes factors within the organization that impact the approach and success of your operations (Kokemuller, 2016). The internal environment will inspect the qualities and the shortcomings of the organisation and allow it to focus on the relative quality variations.
The external environment consists of a variety of factors outside the company door that you typically do not have much control over. Managing the strengths of your internal operations and recognizing potential opportunities and threats outside of your operations are keys to business success (Kokemuller, 2016) for example the manger has no control over business competitors or change in law or general monetary conditions. However, the CEO of an organisation has some measures of control in responding to changes in its external environment.
Figure 1
Source: http://www.leoisaac.com/planning/strat016.htm
• Competition
The organization has to know its competitors’ strengths and weaknesses, and how they operate, in order for the organization to be successful.
• Communication
Communication is also a key part of the planning process. All employees have to be informed that a strategic planning process will be undertaken, including how they will be involved in this process. They might have to provide input through feedback surveys, focus groups, or meetings, regarding their ideas for organizational direction. The senior management will then share the strategic plan with employees and communicate to them how their engagement will ensure success in the execution of these strategies.
• Innovation strategies
When creating strategies for new products and services, an organization must develop a strategy for innovation which includes reshaping the organizational culture to be innovative, and implementing a process for managing innovations. This helps to drive the new product and service delivery strategies. Once the strategic plan has been put together, the organization should identify the projects that are required to ensure success in the execution of each strategy. Prioritization of all these projects should then be developed to ensure the high priority ones have the proper resourcing to ensure success (Stanleigh, 2016).
• SWOT Analysis
The organization needs to understand its strengths and weaknesses, as well as the threats it could face and opportunities to be grabbed. Understanding all these factors will help the organization to know where it needs to improve.
• Organizational culture
Organizational culture is as unique and diverse as an individual’s personality. If an organization’s employees believe that change is to be feared and avoided, then change implementation will be reactive and haphazard. However, if they believe that it is worthwhile and everyone’s responsibility, then that change will occur with relative ease.
• Continuous assessment
After the execution of the plan, continuous assessment is necessary to constantly and continuously improve the strategic planning process, including the quality of the strategic planning materials and deliverables (Simerson, 2011).
1.2) Effectiveness of techniques used in developing strategic plans
PORTER’S FIVE FORCE MODEL
Porter’s five models determined the type of competition in their industry area, such as supplier power, buyer power, treat of the new entrants, treat of substitute’s products and intense rivalry among existing players.
Advantages
• This model can help business in participating in new market and help I understanding more on their business. Like Virgin Airlines merging with Delta Airlines to be able to go to new destinations for them to gain more market share.
• It gives more understanding to the business and gives assistance to the organisation to be able to know what strategy can be used for their market.
• This gives organisation to acknowledge, what supplier power, buyer power, new entrants and substitutes means to their organisation. To Virgin Airlines if the supplier refused to supply food to serve in the plane or fuel for the plane to move, they know they are in trouble. Buyer power, if there are no more passengers to buy tickets to fly their organisation will close down. New entrants are the new Airlines can be treated well. So, if all these are in other they have advantage against their competitors.
• This model allows the business around the world to under the kind of strategy they need for their market. It makes the organisation like Virgin Atlantic knows where they are and their next step to follow to be able to gain the competitive advantage.
Disadvantages
• This model is difficult to use in a complex company where there are segments and products.
• It supposes to a given state of affairs while new market entrants are changing every days’ market.
Under the reflection of an industry the suppliers, buyers and new competitors undertake irrelevant and do not run the system outside the industry
BCG MATRIX
This model theory divides the product under stars, cash cow, question marks and dogs. Stars refer to high share or high growth market. Virgin Atlantic’s cash cow is the upper class section denoting high share low growth rate. This product targets wealthy customers and business passengers. Its’ dogs are the Virgin Atlantic Premier class customers for low market share and low growth rate. Question marks have high potential but will require great resources to build market share, for example the Premium Economy class.
This matrix is important because it helps an organization know when to focus on a new business, and when to invest. It also helps an organization to make decisions about future actions, and to assess the organization’s current portfolio balance. However, the success of an organization does not only depend on market share but on other factors as well. It is also difficult to get data about market growth and market share, because the term “market” is not clearly defined.
2.1) Organizational audit for Virgin Atlantic
Internal Environment: The internal environment can be affected on the prospect of an organisation. For the most part, the internal environment will inspect the qualities and shortcomings of the organisation and it is likely that’s noteworthy talk will focus on the relative quality of internal environment variables.
There are different tools and examination systems that can be utilised to carrying out organisational audit for example, SWOT and BCG et cetera.
SWOT analysis
Strength:
• A strong brand name and a well-established reputation and Introduction of innovative technology
• Strong organizational structure and well trained employees
• Virgin Airlines flying since 1984 and have received numbers of awards for their performances
Weaknesses:
• Limited routes and destinations
• Small aircraft fleet
• Marketing is focused on holiday and business destinations
• Richard Branson acts as the decision-maker for multiple companies
Opportunities:
• This organisation has got opportunities to expand its operations because of its global operation. Merging with Delta Airlines is another opportunity for Virgin Airlines because it added more to destinations which they have more passengers and upper hand than other Airlines.
• Weaker competitors in the U.S. market
• Flying into outer space (Virgin Galactic)
• Alliances and mergers
• More holiday destinations to the Caribbean Islands
• In flight internet connection and e-commerce
Treats:
• Natural calamities like storms and hurricanes
• The recession
• Competition for routes from British and United Airlines
• Fluctuating fuel prices
• Budget airlines that are cheaper
• Other Air lines like British Airways and so on are the treat because they are looking for the same passengers and they travel to same destinations. So by this, Virgin Airlines needs to put more effort in looking after their passengers to be able to get more market share than other Airlines.
2.2) Environmental audit for Virgin Atlantic
An organization should take the environment into consideration before starting the strategy plan process because environmental analysis feeds all aspects of development. An environmental audit includes a political, economical, social, and technological analysis.
2.2.1) PESTLE Analysis
Political
Virgin Atlantic operates its business worldwide. Therefore, political factors affect its operation. These factors include government intervention, taxation policies, new interest rates, government position on marketing ethics, and lack of recognition by the government of the Air Miles scheme as a taxable perk.
Economical
Increasing fuel costs account form a big percentage of an airline’s budget, and this has been a problem for Virgin Atlantic. Other factors are insurance costs, inflation, employment levels per capita, and higher security costs and issues. It is essential for an organisation like Virgin Airlines travelling around the world to be aware of exchange rates of each country they fly.
Social
Virgin Atlantic keeps an eye on the attitudes and cultures of customers in order to give them better services and not to offend them. Employees in the airlines also have their social considerations factored into their work so that any cultural holidays, rituals, and other aspects are maintained. Virgin Atlantic masterminded their staff in approaches to manage and to be able to meet contrasting social variables and this gives them unmistakable understanding about different social aspects.
Technological
This factor has a very huge impact on strategic planning. Virgin Atlantic is technologically advanced with internet on distribution and cost synergies, web-page development, e-marketing and e-advertising, and an active presence on social media.
Environmental
It is crucial in today’s business for organisation to understand its environment in other to keep up with the market, Virgin Atlantic has dedicated team and dependable alliance that regularly access and respond to different issues to gain more competitive advantage.
Legal
Any changes in legislation of Virgin Atlantic destinations may affect it business positively or negatively for example a new president or business secretary may change some of the rules and regulation which will affect foreign flights.
2.2.2) BCG Analysis
BCG matrix is a type of planning tool which helps in identifying market share and growth of business
Cash Cow: The firm has high market share in its consumer goods due to which it has the capacity to attain high profit margin.
Dogs: the Virgin Airlines can be affected by intense competition. Likewise, high amount of risk is involved in carrying out its operations under market which raises the portability of disappearing.
Stars: the organisation first position in respect to revenue and this improves its chances for growth and development.
Question Mark: “The organisation is constantly diversifying its area and expanding it by investing in number of related activities” (Hurn, 2011). The entire structure of an organisation relies on upon the improvement of business system in which is an incredible critical for an organisation. Business procedure improvement is required a fitting investigation of an organisation and its surroundings. This examination must be executed at internal and external environment in order to recognise the qualities and shortcomings of the internal environment and also qualities chances of the external environment.
2.3) Significance of stakeholder analysis when formulating new strategies
Stakeholder analysis is the process of identifying the individuals or groups that are likely to affect or be affected by a proposed action, and sorting them according to their impact on the action and the impact the action will have on them. This information is used to assess how the interests of those stakeholders should be addressed in a project plan, policy program, or other action (Richard, 2010)
Using stakeholder analysis when formulating new strategic will give them understanding of what you are doing, it benefits and they will be able to support you actively. This analysis helps an organization to understand the strength of the organization’s present competitive position, and the direction in which the company is headed. It also identifies the people who support the organization’s activities. By using the analysis, the organization is able to get support from the necessary stakeholders to keep the business going, learn about their opinions concerning the business, and keep clear lines of communication with the stakeholders. The airline industry is characterized by the presence of a few carriers and many suppliers vying for business. Therefore, it is not surprising that the power of the suppliers is low and the airlines have the upper hand in their interactions with the suppliers.
Figure 2: Power/interest Grid for Stakeholder Prioritization
Source: www.mindstool.com
2.4) A new strategy for Virgin Atlantic
A well strategized labor or employment method in Virgin Atlantic will lead to an increase in the overall profitability of the organization. Labor costs and working conditions for the staff could be restructured, with maximum payouts going to executives and value to major shareholders. Shareholders need to feel valued and feel like they are contributing to the development and growth of the company. The company should ensure the profits keep up so that their dividends are maintained or increased. More money in the bank for shareholders means they will have more confidence in the company; therefore, they will keep their investments in the company intact. The company could improve the payment packages for its employees, with more overtime and bonuses to keep them satisfied. Incentives could also be given for loyalty and to long-serving employees. If employees are satisfied, this will mean that they will work harder to ensure customers are also satisfied.
Virgin Atlantic could be operated using the most up-to-date electronic, informational, and aviation technologies to ensure low operating and marketing costs, maximum efficiency in deployment of its resources, and a high level of customer service and convenience. The airline, its staff, and the organization as a whole could also become dedicated to providing a high level of customer service and convenience, and efficiently meeting the needs, wants, comfort and safety of the passengers. This will assure Virgin Atlantic’s continued acceptance in the marketplace and its long-term growth and progress.
An airline that can maintain a mean and lean operation while still meeting the needs and desires of its customers, with the right fares, will not only survive, but will prosper. The airline should provide more high quality services on routes and in markets that currently are unserved, poorly served, or under-subscribed by existing carriers, thereby setting a new pace in air service in the region. Virgin Atlantic could also employ the use of cost-effective, up-to-date regional aircraft that will be sized right for the market and the route. This will lead to higher load factors, reduced costs, improved efficiency and flexibility, greater passenger comfort and satisfaction, and ultimately higher net profits. These aircraft should have the latest technology in aviation and navigational equipment to ensure a high level of reliability, punctuality, safety, and a good customer experience.
The use of the latest electronic and informational technologies in sales and marketing are also needed. These could be used in reservations, ticketing and check-ins, scheduling, resource planning, operational oversight, and cargo tracking. Such techniques will reduce the need for many staff while offering ease of use and enhanced access and convenience to the customers. The airline should also develop relationships, cooperation, and partnerships with other larger and highly regarded airlines in the region and internationally so that it provides a wide range of connections, through fares, frequent-flyer mileage sharing, and other passenger and client advantages through interline arrangements, code shares, and common hubbing.
3) Approaches to strategy evaluation
3.1) Analysis of the appropriateness of alternative strategies
• Market entry
A market entry strategy is the planned method of delivering goods or services to a new target market, and distributing them there. Virgin Atlantic is an airline with a big personality. It has professionally promoted its brand name all over the marketplace, ensuring that wherever it goes, the name is already known. It is known locally and internationally when it comes to travel fulfillment and convenience. Virgin Atlantic’s ability to value its customers has made it shadow other airlines because it cuts its service costs while providing outstanding services to the target marketplace. The organization has developed an on-going relationship with its customers in-between flights because most of the customers fly very occasionally.
• Substantive growth
Substantive growth is the growth that is essential for any business and is marked as constant. Achieving real substantive growth in a business can make up for other deficiencies. Too much growth in a very short time can be problematic, but substantive growth has its advantages. The organization has doubled in size over the past few years despite facing great competition from a transatlantic market. Its business class and holiday destinations innovation has made the brand to be known as it is today, with marked growth. The revenues and fleet at Virgin Atlantic have been doubled, and more staff added to the organization. These new additions are primarily for the launch of new long haul routes around the globe.
• Limited growth
This growth is usually geared towards quality rather than quantity, with the company growing very little. A limited growth strategy limits the company’s ability to take advantage of the economies of scale or savings that kick I when the company begins to handle additional volume. The organization could offer its existing services in a different market place in order to develop the brand in that place. Product development would help to increase revenues when sales are down or stagnant. Market penetration is useful in advertising and offering discounts to customers in order to entice them when the season or sales are low.
• Retrenchment
Retrenchment strategy is when an organization reduces its diversity or overall operations. The strategy involves withdrawing from certain markets or discontinuing the sales of certain products or services in order to make a beneficial turnaround. When a business gets into trouble financially, it is often tempting to give up and go do something else. However, business turnaround can be used to make the company profitable again. Knowledgeable and experienced outside support is usually brought in to enact a recovery plan, putting the company back in business. The business assets can also be liquidated and turned into cash to pay off its creditors. A struggling business should get expert advice from a turnaround professional before deciding on whether to liquidate or turn around the business.
3.2) Selection of an appropriate strategy for Virgin Atlantic
Virgin Atlantic should continue to cultivate its marketing strategies in order to keep growing as it is. It should continue to form alliances with other airlines, especially for the long-haul routes, in order to increase its customer base. Technological advancements should be used at the forefront of its marketing strategy in order to reach more customers worldwide. It should keep the brand in the public’s consciousness so that it can be thought of alongside other international airlines. It can do this by communicating the unique attitude that defines the brand, and giving its customers reasons to choose Virgin Atlantic over their competitors. This organization is not huge, with most of its customers only flying once or twice a year. Therefore, it needs to develop an on-going relationship with these customers all year round. The airline could keep the customers appraised of any new offers through social media or email anytime they have offers. This will keep the customers aware of what is new in the airline.
The airline’s strategy should base on appealing to customers across the globe. Wherever it operates, individuals and business travelers should want to use the airline. It should make sure that all its customers enjoy a unique premium service whenever and wherever they come into contact with the airline, and recognize that the services offered by Virgin Atlantic are worth the money they are paying. The airline’s core business is moving people and cargo, therefore new products and services should be developed to complement this change.
Virgin Atlantic should find out who their target customers are, identify their needs, and cater to this target audience by making their experience fun and worth it. For example, putting a bar on board, having a massage parlor on board, and providing excellent food and drinks. Customer advocacy would be a good strategy to get more customers. By giving customers unexpected perks, even when they are not flying, will ensure that the customers spread the brand name to their friends and family. Word of mouth is a very powerful tool for marketing.
Regardless of which growth strategy is selected, the airline should have an infrastructure that is up to a standard that supports successful execution. Achieving this requires utilizing leading indicators and performance drivers that align with the strategy, and growing leaders at managerial and non-managerial levels in the company. A process should be initiated at the airline to identify strategies with the highest probability for success. The senior management should consider the growth potential within the present core business and the opportunities and growth potential associated with creating innovative value propositions for underserved customer groups. As the senior management goes through this process, it will become clear if and when adjacent growth options should be considered.
4) Understanding how to implement a chosen strategy
4.1) Roles and responsibilities of personnel charged with strategy implementation
It is important for everyone involved in the implementation to understand their roles. Management should select a person or persons who will guide the process and divide work among the employees according to their roles. All roles should be clearly defined in order to ensure proper implementation. Group leaders should have an accountability system that ensures that the implementation team meets its timetable for getting the new program, policy or product in place. Top management is responsible for developing long-term strategic plans that make clear how the company will serve customers and position itself against competitors. The CEO should develop the strategic plans and goals to be implemented and mobilize resources for the project. The general and branch managers have to define and discuss policies and strategies from top management and pass then on to lower management. They have to design and implement effective group and intergroup work and information systems and diagnose any problems that arise during strategy building. Supervisors control and direct the way the prescribed strategy is to be implemented by assigning tasks and guiding employees on their roles and activities. They also ensure the quality and quantity of production while making suggestions and recommendations for change.
4.2) Estimated resource requirements for implementing new strategies
The Information Technology department of an organization is essential to operations. At Virgin Atlantic, dedicated leadership is needed in order to handle the IT strategy. Since the group already has the top management roles defined, it should add another position such as CIO in the organizational structure, whose role will be to streamline the IT strategy. New technology should be used to enhance the speed of work and ensure customers are served faster. Patch management systems should be installed so that if a problem with the databases arises, the whole system will not have to be shut down, causing an inconvenience to staff and customers alike. The marketing department’s management should also be streamlined to be able to deal with the marketing demands as they arise.
Due to the current stiff competition in the global airline market, Virgin Atlantic should have a dedicated financial strategy for the business. A lot of funding is required to expand further into developing economies. The organization could reduce its stake in non-performing routes and alliances, and use that money to fuel the expansion plan of Virgin Atlantic. The use of new and faster technology will reduce some costs, leaving that saved money to be put into work making improvements elsewhere.
The organization should fine-tune its marketing strategy and launch new promotional and marketing campaigns around the globe. This will help reinvent the brand image and brand value in a newer generation of customer who are not aware of the history of the airline. The organization’s HR department can be a useful tool in marketing. The department can help the sales department to apply a higher level of discipline to talent management so that the sales organization can perform at its best. The department could also ensure that all the employees at Virgin Atlantic are satisfied with their jobs by conducting occasional checks and consultations with the employees.
4.3) The contribution of SMART targets to achieving strategy implementation at Virgin Atlantic
In order to reach its objectives, Virgin Atlantic has to set goals that will enable it to be successful.
S- it should have specific goals that are short-term and more immediate. Virgin Atlantic has to be specific about how it aims to expand its customer base internationally, and the goals have to be clear to anyone that has basic knowledge of the intended project.
M- measurable goals that state how much of what kind of performance, and by when it is to be accomplished. The company should also know when it has achieved its goals. Virgin Atlantic should set goals that are can be measured against other companies, and determine whether these goals have been achieved.
A- aggressive yet achievable goals stated in measurable or quantifiable terms. There should also be agreement with all the stakeholders on what the goals should be. The airline should not set goals that are difficult for the staff or stakeholders to implement. If possible, staff should clarify whether the goals set for their departments are manageable, because if they cannot achieve these goals, then the whole strategy will fail.
R- they must also be assigned to a relevant and responsible person or department for implementation. If the goals are not properly defined by the person in charge, they might be executed poorly. The goals should also be realistic within the available resources, knowledge and time. No goal should be set if there are no financial or human resources available to implement the goals.
T- include a timeline of when the goals should be accomplished. Enough time should be allocated to achieve the goal. However, too much time should not be given as it would affect project performance. The managers should constantly evaluate the timeline given for each project and ensure that it is within the time frame that was originally allocated, otherwise this will affect the implementation of other pending projects.
Conclusion
Virgin Atlantic has definitely grown over the past few years and is poised to make even more changes in order to continue the constant expansion of the business. Consistency, reliability, legendary customer care, a recognized brand name, and the extra mile to achieve customer satisfaction are all strategies that the organization has employed in order to successfully compete with other airlines. Their innovative marketing strategies have also been key in the organization’s success. If the organization keeps on developing strong innovative ideas and practices, no doubt it will become the leading airline in the world.
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