Research Topics: Virgin Atlantic Airlines Strategy

STRATEGIC ANALYSIS OF VIRGIN ATLANTIC AIRWAYS

THE COMPETITIVE ENVIRONMENT OF VIRGIN ATLANTIC AIRWAYS   Introduction             The Virgin Atlantic Airways is a UK-based private international airline that started operation in 1982.  Flying up to 20 destinations in North America, Asia and Africa, it is 51% owned by Virgin Group and 49% owned by Singapore Airlines ().  It competes with other local and international airlines including British Airways, the biggest and leading in UK.  In 2005, it posted .5B in sales and M net income with year-on-year sales and net income growth more or less at 37% and 900% respectively ().  With this information, it suggests firm’s bright future and industry fair share of the market.  However, external and industry environment analysis is a continuous process ( 2003) that every now and then makes prediction and preparedness an integral part of strategic actions of firms to efficiently manage opportunities and threats outside its organization.        The External Environment: PEST Analysis             In the local environment, local elections to be held on May this year could made Tony Blair’s concentration in national issues such as health and education shift into local issues such as crime, anti-social behavior and environment ().  As a result, transport industries including aviation should consider this early the type of their fuels and fix emission loopholes.  They must research oil suppliers that sell environment-conscious fuels and test its efficiency and compatibility with aircraft engines including preparation to possible fluctuations in present fuel costs.                In fuel-related issue, the European Union resorted legal action against member countries like France, Germany and Italy of protecting their utility firms against foreign competition ().  As a result, prices of fuels failed to obtain efficiencies of competitive industry making oil prices for the transport sector more costly.  Local aviation firms should consider this EU action significant disincentive to their cost-effective strategies because UK, unlike the mentioned countries, fosters foreign imports making oil prices for the industry cheaper.  If these countries are able to liberalize the energy sector, possible cost strategy is necessary to retain the prior upper hand.               Research suggests that rural, metropolitan and London population either employed, unemployed or economically inactive dispose most of their weekly budget to transportation along with food and recreation ().  Since socio-cultural segment affects economic and political/ legal segments ( 2003), aviation industry could less be influenced by the latter outcomes despite of their ambiguity (will Blair retain position or will EU countries accept the directive) because consumers are willing to pay with little regard to price, instead, value of service.  As a result, it is more strategic to focus on operations than financial structures.                Another finding show that 58% of the household population has computers while 49% of which has internet connection with metropolitan areas like London posted the highest incidence ( ).  This information is relevant to most huge firms like Virgin Atlantic Airways who heavily relies in e-business with its interactive website wherein customers can obtain flight schedules and book a flight with their finger tips.  The other half of the population without computers can be addressed by the firm through other forms of media.  In addition, it can also verify through additional scanning the prevalence of internet café in rural areas where household ownership is relatively low.   The Industry Environment: Five Forces             New entrants in the industry basically face two difficulties: barriers to entry and retaliation from present firms ( 2003)  In the aviation industry, particularly the service passenger-based ones like Virgin Atlantic Airways, in modern economies are privately-operated that calls for substantial financial requirements at the fore.  Since travel services are derived demand (), new entrants should be able to cut a share in the pie in the presently saturated market.  This endeavor could result to another substantial resource to be deployed.  However, with such new entrant engagement, it does not assure of intended results because competitors like Virgin already created strategic links to other country-routes including its alliance with Asian giant Singapore Airlines that makes it easy to create counter-strategy.               Boeing, the largest manufacturer of jetliners and supplier of Virgin’s aircrafts, had recently signed long-term agreement with largest aerospace parts distributor            for an Integrated Materials Management ().  As a result, Boeing could reduce its inventory and minimize warehousing costs because spare parts will be provided only when needed.  A cost reduction strategy from a supplier can assure customers like Virgin of price management scheme, if not, its another supplier, Airbus (the once number one airline manufacturer) could be resorted.   Competitors in the industry have the same capability in terms interactivity of their web pages like Virgin.  This is supported almost fifty percent prevalence of internet connection among UK market, not to mention other countries.  As a result, the power of buyers to gain access to prices and services of firms increase making them knowledgeable of distinction of one from the other.  Companies on their part are obliged to be more competitive especially in maintaining and updating their web sites.    The country’s sea transport industry had developed super ferries while the 2003 recorded 17.4% increase of UK passengers who took cruise holidays that reached nearly one million in that year ().  This development would make sense to airline industry tourism and leisure market especially foreigners that like to see the national endowments.  With demand for airline transport rise at faster rate than supply for it, the airline industry is required to effectively allocate its resources in a manner that exploit this supply shortage.   Other airline competitors in the likes of AMR Corp., British Airways and Lufthansa are operating in at least 150 destinations compared to Virgin’s 20 ().  As a result, rivalry among these firms against Virgin is relatively insignificant although strategic actions of Virgin that directly and significantly threat their market could spark retaliation in the detriment of relatively small firm.  The firm should focus in its target market and avoid competing with these large firms.    Conclusion             By studying this external and industry analysis on environmental facts, it could be said that Virgin Atlantic Airways is situated in standard cycle markets wherein its competitive advantage is moderately shielded from imitation.  In general, airline industry belongs to slow cycle markets, however, due to relatively smaller capital and operations of some firms like Virgin, companies within this industry are unable to assure their long-term above average returns because they are relatively vulnerable to general environment (low lobbying power) and relatively unsecured to industry forces (potential entrants or larger competitor predation).  As a result, Virgin should focus in a specific market niche or specific routes to obtain value other than price and survive the competition.         Bibliography Credit:ivythesis.typepad.com

STRATEGIC ANALYSIS OF VIRGIN ATLANTIC AIRWAYS

THE COMPETITIVE ENVIRONMENT OF VIRGIN ATLANTIC AIRWAYS Introduction The Virgin Atlantic Airways is a UK-based private in...

BUSINESS REPORT ON VIRGIN ATLANTIC AIRLINES

BUSINESS REPORT ON VIRGIN ATLANTIC AIRLINES                             According to (2000), the airline industry is a unique and interesting industry. The reason for this is because it captures the interest of a wide audience because of its glamour, reach and impact on the large and growing numbers of consumers/travelers worldwide ( 2000). The importance of the industry is unquestionable. The industry is worth over US,000 billion (directly, indirectly and “induced”), employs 22 million people, and transports and services over 1.25 billion passengers a year. A quarter of the world’s manufactured exports by value reach their markets by air. The industry also plays an important role in travel and tourism, the world’s largest industry, employing one in nine workers ( 2000).               One of the pioneers of the global airlines industry is the UK airlines sector. According to the  (1999), the whole UK aviation industry contributed £10.2 billion to GDP, 1.4% of the total, in 1998; undoubtedly a huge contribution to the UK economy. During that year, it also supported up to three times as many individual jobs, and directly employed 180,000 people in the UK, 0.8% of the total ( 1999). Furthermore, it also exported £6.6 billion of services, 11% of UK exports of services and 3% of total UK exports, transported a further £35 billion of UK exports, over 20% of all exports of goods, contributed £2.5 billion to the Exchequer, on a conservative estimate, and invested £2.5 billion a year over the past 5 years, 3% of total UK business investment (1999). The report basically emphasized the great role that the airlines industry performs for UK’s economy.   Specifically, behind the results, there are individual companies that contribute to this industry’s success. One of them is Virgin Atlantic Airways, one of the UK airline industry’s most performing airline companies to date. This paper will provide a business report on the Virgin Atlantic Airways Ltd using available resources from the internet and the company website, and provide a detailed SWOT and PEST analysis of the company. The aim of this paper is to provide a descriptive business overview on Virgin Atlantic Airways.   A BRIEF HISTORY OF THE UK AIRLINES INDUSTRY   The year 1972 was when British Airways was formed. The British Caledonian Airways (Bcal) also existed that time as a result of the 1969 UK policy change to introduce competition. The Civil Aviation Authority (CAA) gave some preference on licensing policy to BCal. Until 1981 BA was operated as a public corporation. In spite of rationalization efforts, its financial performance was relatively poor. Since 1979 preparation for privatization of BA started. In 1984 BA became a public limited company. In 1987 the UK government sold the entire stake (1995).   The Civil Aviation Act of 1980 required more liberal policy. But in 1986 BCal ran into financial difficulties, and BA acquired BCal and thereby enhanced its leading position further. In the 1980s major deregulation measures were also taken, such as domestic fare and route licensing deregulation. Many entry barriers into domestic services were dismantled (1995). The exception was access to Heathrow airport because of congestion and the slot allocation system, so that no airline that had not been operating from Heathrow before 1977 would be granted access. This ban was lifted in 1991, but the allocation procedures continue to afford considerable advantage to incumbent operators (1995).   COMPANY BACKGROUND               Virgin Atlantic Airways Ltd was established in 1984 by known British entrepreneur  (, 2004; Virgin Atlantic Airways Ltd, 2006a). Surprisingly, this new business that  established during that time took him only three months to make it a high quality, value for money airline (2004).   Some of the ‘firsts in the industry’ that this airline company has offered is providing individual TVs to business class passengers (Virgin Atlantic Airways Ltd, 2006a), which was also known as the first seatback entertainment system in airlines. Furthermore, in 1984, it was also the first passenger airlines in the UK and in the world to offer complimentary limousines and onboard bars, which according to the company, revolutionized in-flight mingling. In the early nineties, it also introduced other ‘firsts’ in the history of airlines service – in-flight beauty treatments and business economy cabin. In the latest century, it introduced a first solo, around the world, flight and spa and pool services in their Heathrow clubhouse (2005).   The company saw its success by the end of the eighties as it had already served by that time almost 1 million passengers (Virgin Atlantic Airways Ltd, 2006a). Virgin Atlantic is headquartered in Crawley near Gatwick airport in London and has offices in the USA, Caribbean, South Africa, Hong Kong, Tokyo, Shanghai, Delhi, and Lagos (2004).   A couple of years ago, in 2003, Virgin Atlantic Airways achieved a £1.4bn turnover, and a reputation for high-tech innovation and quality of service (2004). Currently, the company has offices in 20 countries and flies passengers to most of the main cities of the world. In terms of information technology, it has a complex and geographically dispersed infrastructure, using Microsoft Windows-based Intel servers, Oracle databases, J2EE application servers, and some 4,000 Windows desktops ( 2004). This shows that in this modern information age, Virgin Atlantic Airways do not lag behind competitors in terms of information technology, as it utilizes modern information technology as a competitive advantage over competitors.               Virgin Atlantic Airways has always been a priority for founder . For instance, despite the fact that Virgin Atlantic was already known for its great service in the early nineties,  showed acts of sincerity of improving the company’s service further, as he sold Virgin Music to Thorn EMI and invested the proceeds into Virgin Atlantic (Virgin Atlantic Airways Ltd, 2006a). Despite the hip and rock and roll theme of its website and the overall cliché of the company, it is dedicatedly focused to service as testified by Branson’s strategies over the years. Furthermore, the awards that the company received over the years also prove that delivering quality services are its main concerns to the customers. Some of the latest awards that the company received, specifically in 2004, are: Business Travel Awards’ Best Long Haul Business Airline; Travel Weekly Awards’ Best Transatlantic Airline; Cargo Airline of the Year Awards – Air Cargo News’ Cargo Airline of the Year; Communicators In Business Awards’ Internal Online Publications – Verb Online; and Design Week Awards’ Industrial Product Design winner – Upper Class Suite Editorial Design winner – Carlos (Virgin Atlantic Airways Ltd, 2006b).               Virgin Atlantic Airways Ltd’s official website reflects the company’s dedication to service. The site navigation has a link to customer relation page where customers can read and learn what types of services they can expect from the company. In includes customer charters on booking, at the airport, during the flight, the other end, refunds, codeshare flights, passengers with special needs, and other concerns (Virgin Atlantic Airways Ltd, 2006c). For instance, in the booking services, the company ensures to give the customers the following information: the planned scheduled time of departure and arrival of your flight; the airport and terminal of departure and arrival; the number of en-route stops, if any; any conditions attached to the fare you will pay; and the name of the operating carrier and the flight number (Virgin Atlantic Airways Ltd, 2006c).               Like other airline companies, Virgin Atlantic Airways also offer a frequent flyer programme for its customers. In Virgin Atlantic, this programme is known as the Flying Club. This programme comes into three tiers. The first tier is Red, where frequent customers can earn basic benefits. This is followed by Silver, which understandably offers more benefits than Red. Finally, the customer can upgrade to Gold, given that they reach the required number of miles traveled with Virgin Airways. The Gold membership earns points by 50% meaning that customers can avail larger benefits from the company faster (Virgin Atlantic Airways, 2006d).                         On a recent report by(2005) in the Wall Street Journals, it was revealed that Virgin Atlantic Airways was having a premium service makeover since 2000. Finally, in August 2005, the company launched its £11 million (.5 million) business-class lounge at its Heathrow Airport hub. It basically includes a 45-foot-long bar of granite and marble, hand-stitched yellow leather armchairs, a waterfall and a spa (2005).   Approach                 Like the legendary  (CEO who brought up General Electric to the top),  is also one of the most popular CEOs around the world. However, unlike  does not compile his management strategies, which according to him, are just tasks for him to “pick up the phone and get on with it”. But according to the  (2005) coverage on , his strategies can be compiled from his previous speeches and reports. The following are his formulas: must sound like fun; must offer customers simple, honest and transparent pricing, high standards and attention to detail and professional, but “uncorporate” customer service; if there’s a duopoly, there’s room for competition; must have the “right” people; must be “positive use” of the Virgin brand; must have protection of “downside”; 50/50 financing; keep the portfolio diversified, with each management team focused on its own business and entrepreneurial goals; brand is the unifier; keep the employees happy ( 2005).   PEST ANALYSIS OF THE AIRLINES INDUSTRY                 The PEST analysis stands for “Political, Economic, Social and Technological” factors that are needed to be analyzed from the industry’s external environment. It is important to cover this to further understand the condition of the airline industry.   Political Issues   One of the political issues that concern the airline industry is the effects deregulation, which until now is being researched by orders of concerned governments around the world ( 2000). If government policy forced pre-deregulation airlines to compete on the quality of their services rather than price, then (1995) has suggested that the sole goal of postderegulation policy has been to create cheap, below-cost air fares for consumers. However, this still continues to be an argument along with the rest of the issues brought about by deregulation. Deregulation was based on the contestable market theory ( 1982) which suggested that governments should seek to promote contests for markets, even those where large firm size and limited competitors existed. Regulation was believed to encourage competition based on service quality rather than price, limit operational flexibility, and create no incentives for improving efficiency and productivity. However, it has been argued that deregulation has shifted competition from service to price (1998).               Another political issue that should be considered is that the Department for Transport is actually keeping an eye on airline activities. For instance, in the White Paper released by the DfT (2003) entitled: “The Future of Air Transport”, several key issues in airlines that the government wishes to resolve were stated. In the third chapter of the paper, environmental issues were mentioned such as noise, noise mitigation and compensation, air quality and climate change. As those issues were, several laws that support those issues were also brought up, exposing the political side of the situation. Some laws are yet to be amended such as the Section 78 of the Civil Aviation Act 1982 “so that controls such as night restrictions could, subject to public consultation, be set on the basis of noise quotas alone, without a separate movements limit” ( 2003).               There are also key international bodies that set the standard of aviation industry within Europe. This includes the European Union, the International Civil Aviation Organization, the European Civil Aviation Conference, and the EUROCONTROL ( 2003). Each has specific power and functions, and may influence the shape of the aviation industry, not only in UK, but also the rest of Europe in the next few years. This shows that there is a great deal of political climate when it comes to setting the standards in the airlines or aviation industry. New standards to be set will still undergo discussion and debates among these organizations, and among UK’s DfT and other local bodies that look after the country’s airlines industry. Some of the issues that these bodies may tackle include safety, security and service quality in aviation ( 2003).   `           On the other hand, among the airline companies around the world, one significant political issue taking place is the emergence of global alliances. One example of a major alliance that took place is the OneWorld Alliance, which has notable members such as Aer Lingus, British Airways, Cathay Pacific, Finnair, Iberia, American Airlines, Lan Chile and Qantas Airlines (2003). There is also another notable alliance, which is the Star Alliance Global networks, consisting of United, Lufthansa, SAS, Air Canada, Varig, and Thai International (2001). The implication of these major alliances is that many carriers would fear being left behind, forcing them to join the trend (2001). This could be a danger to isolated airlines as they would have little to offer in terms of resources, strategies and finance. One advantage of these alliances include the enhancement of partner airlines’ productivity (1.7%), and that allied airlines tend to adopt more competitive pricing after entering an alliance ( 2001). Another advantage is that it enables partner to lower the prices of their services without too much weight on their part. In other words, it enables partner airlines to achieve an average of 5% gain in total factor productivity and 1.4% increase in profitability while being able to lower their prices to consumers by an average of 5.5% (2001). Furthermore, this enables partner airlines to improve profitability by an average of 0.3 percent ( 2001). However, acquiring these advantages depend greatly on the scope of cooperation in the alliances ( 2001).   Economic Issues Similarly, the economic issues in the industry are also mostly concerned with deregulation. The evolution of industry structure plays an important role in determining the robustness and stability of lower air fares in unregulated markets (2000). Deregulation also keeps airline fares so low as compared to that of other countries. The reason for this is because despite the failure of most entrants since deregulation, investors continue to create new airlines. There is substantial evidence that entry, particularly by low-cost, low-fare airlines, has a substantial effect in constraining fare levels in markets served by the new carriers ( 2000). The second reason is that some in the industry have argued that financially marginal carriers may act in ways that depress prices below competitive levels, inducing contagion in financial distress (2000). In addition, some industry participants have argued that financially distressed carriers have cut prices in an effort to raise short-term cash, depressing market prices below efficient levels and threatening the financial security of healthy carriers. Another economic concern is the fact that the airline economy of the US is in a huge upset after the September 11 attack. Some of the companies declared bankruptcy while others are still struggling to survive (2003). The contribution of the airline sector to the local and world economy is also another economic issue that should be noted. In UK, one of its contributions to the economy is its role in increasing jobs, whereas it was reported that aviation directly provided 180,000 jobs in the UK in 1998 – 0.8% of total employment. 40% of these jobs were in Greater London, where the industry accounted for 2.1% of all jobs ( 2002). This has increased over the years as attested by DfT. It reported that the aviation industry now directly supports around 200,000 jobs, and indirectly up to three times as many (2006). The airlines industry also greatly contribute to the GDP of the UK economy as the  (2002) reported that the “total value-added (i.e. the value of its output less the cost of inputs bought in from other industries) by the UK aviation industry in 1998 was estimated to be £10.2 billion in 1998 prices, equivalent to 1.4% of GDP”. It contributes specifically by region, as it makes a direct contribution as a source of output and productivity growth in its own right ( 2002). The Oxford Economic Forecasting (2002) also argued that good air transport links are important to encouraging inward investment into the UK and to encouraging firms already located here to base new projects in this country. Furthermore, because it is part of the transport infrastructure, it helps make business transactions faster, creates more options, and provides a boost to the tourism of the country. As transportation infrastructure theory posits, improved transport systems can boost productivity growth across the rest of the economy. The economic prosperity that UK currently experience also have some implications on the airlines industry. According to  (2003), “Economic prosperity brings with it greater demand for travel. As people get wealthier, they can afford to travel further and more often”. Currently, half the population of the UK now flies at least once a year, and freight traffic at UK airports has doubled since 1990 (2003). It has been forecasted that air travel in the UK will continue to increase over the years, but (2003) warns that this is somewhat uncertain as they may be negative factors that the industry may encounter along the way. For instance, DfT forecasted that market for air travel might mature more rapidly than expected, causing the rate of growth to slow more quickly than forecast. Furthermore, other economic concerns of the industry include the possible increase of flying costs, for instance, due to rising oil prices or due to the costs of tackling global warming.   Social Issues   In the social factor, the issue of consumer expectation should be given attention. For airlines, the two most important issues are: the reason for travel (business or leisure); and the class of preferred travel (first, business, or economy). The Frequent Flyer survey in 1997 both business and leisure consumers listed the following ten factors driving overall airline satisfaction: on time performance (22 percent), schedule/flight accommodation (15 percent), airport check-in (15 percent), seating comfort (12 percent), gate location (9 percent), aircraft interior (7 percent), flight attendants (6 percent), food service (5 percent), post-flight service (5 percent), and frequent flyer programs (4 percent) (1998).   Today, consumers are more demanding especially in terms of service quality. Fortunately, the airline industry can be considered as the pioneer of customer relationship management as they are the first sector to introduce the frequent-flyers program to increase the loyalty of customers (2002). However, the airlines of today cannot keep up with the pace of CRM. A survey of 17 major airlines around the world reveals that even the most sophisticated among them have only a basic understanding of who their most valuable customers are, or could be, which factors affect the behavior of customers, and which CRM levers are most effective in ensuring loyalty ( 2002). They stated that most airlines lack the systems and process to implement CRM. (2002) stressed, based on their research, that data aren’t consistently or accurately collected in any of the mediums that airports use. Furthermore, another problem for airlines is that they rarely know how much their customers spend with their competitors.  (2002) stated that building customer database is the key to CRM and should be the easiest part for airlines given that they have loyalty programs. Currently, most airlines still are building or thinking of building data warehouses to store variously sourced databases ( 2002).     Finally, another social factor to be considered is the fact that airlines are still exposed to terrorist attacks. This has a tremendous impact on airline security and economy. This is why two of the utmost concerns of the UK Department for Transport are safety and security ( 2003). Fortunately, the UK airlines industry has a good record in safety, with accident rates kept low despite the rapid rise in traffic levels over the past two decades. The industry continues to follow a high standard of safety, for instance, regular inspections and maintenance of aircrafts. Safety in the UK airlines industry also improved as a proactive measure on terrorist attacks. For instance, the list of prohibited items in the aircraft cabin has been extended, carrying out secondary searches of passengers and their cabin baggage at the departure gate, requiring UK airlines to fit special intrusion-resistant flight deck doors, and establishing a capability to put covert armed police on UK aircraft where necessary ( 2003).   Service quality is another social concern in the UK airline industry. According to(2003), standards of service are a legitimate element of competition between operators. Airline consumers are now a dynamic part of the industry as they are more empowered than ever, expecting high levels of personal attention and customer service, and more confident in making complaints ( 2003).       Technological Issues   Technological factors include head to head competition in the technological innovations in the industry. Traveling in air is a dangerous task that’s why aircraft engineers have been researching ways to improve security in airlines. Technological advances have resulted in automated cockpit procedures to make up for the human errors that usually occur (2000). Sixty eight percent of crashes are attributed to human error. This may include error during aircraft design, manufacturing, maintenance, or installation. Security breaches that result in terrorist activities can also be attributed to human error. This is the reason why technological innovations in safety are important in the airlines industry. Other technological factors include Customer Relation Management in the Internet.   Online solutions alternative to dial-up are also technological factors that may determine competitiveness as an alternative mean can basically cut the cost of the company. According to  (2004), a remote access solution could provide significant cost savings by allowing the engineers, who were responsible for maintaining the aircraft, to access essential information on the company’s systems from wherever they were in the world, using remote web access.   Fault and service assurance solutions are also technologies that airline companies mostly invest. This type of technology provides the network management team of an airline a real-time, consolidated view of the network to help ensure the availability of network-based products and services (2002).               Another technological concern in airline services today is the integration of electronic flight bag solutions or EFB. EFB is an electronic display system intended primarily for cockpit/flightdeck or cabin use (2003). One of its advantages is that it can display a variety of aviation data or perform basic calculations (e.g., performance data, fuel calculations, etc.) (Aircraft Electronic Association, 2003). EFB is categorized into two classes: Class 1 and Class 2. A Class 1 EFB can be used on the ground and during flight as a source of supplemental information, while a Class 2 EFB can display flight critical pre-composed information such as charts or approach plates for navigation ( 2003).               The PEST analysis conducted shows the current conditions of the global airline industry. Among them, the key issues include the deregulation policies, the global alliances of airline companies, service quality and technological needs. The SWOT analysis on Virgin Atlantic Airways will be based on these issues. One of the interesting facts about Virgin Atlantic Airways is that it was not part or member of any major global alliances during the time of global alliances emergence – meaning it once had strong disadvantage in the late nineties because unlike other huge airline companies, it did not have any ally to cling into if ever something goes wrong e.g. in the financial, technological or management functions of the company. However, even though Virgin Atlantic Airways had been isolated for a few years, it did one thing that other low-cost airline companies fail to deliver – emphasis on quality service. What Virgin Atlantic lack in allies during the times when airlines are jumping into alliances, it makes up with its strong customer service and relations. These are the factors that will be explored in the SWOT analysis of this company.   SWOT ANALYSIS OF VIRGIN ATLANTIC AIRWAYS     Strengths               One of the strengths of Virgin Atlantic Airways is that it is headquartered in a country where airline competition is tolerated and enhanced because of deregulation. UK is one of the countries aside from the United States that is in a strong competitive position in the airline market. The United Kingdom and the United States are two of the countries in the world that dominates the airline market and this can be attested with the number of airline brands they have. The market               One of the advantages of deregulation is that fares have become considerably cheaper than that of the previous regulated system. Pricing of the airline companies have been flexible. Because of this deregulated policy, Virgin Atlantic has been able to offer a premium low-cost service package to customers around the world.               According to (2006), deregulated fares are so flexible that it have brought down fares 10 to 18 percent lower, on average, than they would have been under the previous regulatory formulas. The savings to travelers have been in the range of billion to billion per year. Virgin Atlantic Airways is fortunate because it can set its own prices according to their preference, which is a benefit for airline companies operating under a deregulated policy.               Another advantage of Virgin Atlantic is that even though they are not part of any major alliances such as OneWorld, the company has made allies with some reasonable airline companies such as Singapore Airlines and Continental Airlines. Combined with their focus on customer service, their alliances with these airlines may be an advantage because they have companies that they can share and acquire new technologies and innovations with, or companies who will be there for support when Virgin Atlantic needs it. Some of the benefits that Virgin Atlantic can acquire from these alliances may include: more market access; acquiring means of distribution; gaining access to new technology, and converging technology; learning and internalization of tacit, collective and embedded obtaining economies of scale; achieving vertical integration, recreating and extending supply adjust to environmental changes; diversifying into new businesses; restructuring, improving performance; cost sharing, pooling of resources; developing products, technologies, resources; risk reduction and risk diversification; developing technical standards; achieving competitive advantage; cooperation of potential rivals, or pre-emptying competitors; complementarity of goods and services to markets; co-specialization; overcoming legal/regulatory barriers; and legitimation, bandwagon effect, following industry trends (2005).             The healthy condition of the UK airline industry can also be considered as strength of Virgin Atlantic. The UK government is giving importance to the airlines industry and recognizes its impact on the economy. This means that the market is being pushed up through improvements and innovations for the industry.               Perhaps the greatest strength of Virgin Atlantic is its dedicated emphasis on customer service and innovation. It is one of the few airlines that introduced many firsts in the industry. For instance, it introduced the first seatback entertainment system in airlines, as well as the complimentary limousines and onboard bars, which basically revolutionized in-flight mingling. It also introduced in-flight beauty treatments and business economy cabin, and a first solo, around the world, flight and spa and pool services in their Heathrow clubhouse (Virgin Atlantic Airways Ltd, 2006). It can be seen in the company website that it gives importance to the customers as it wrote down the kinds of services that customers will expect from them.               The robust e-business architecture that the company has also offers easy transactions with customers (2002). As Lanner (2002) stated: “The airline recognised that passengers would benefit from improvements in services and the introduction of new facilities that meet the needs of the modern business and leisure traveler.” Another testament to their excellent service is their excellent reputation for the provision of assistance to their visually impaired passengers, having won the EASE best airline award (for Ease of Access, Service and Employment) for four years, consecutively (2003). Furthermore, it routinely monitors services with a flight performance report form that captures vital information about the quality of service that individual crew members deliver on each flight (2005).               A particular online airline passenger forum in (2006) show that Virgin Atlantic’s services are top class.  One client praises the company for its prompt responses on inquiry, specifically about compensations such as about the frequent flyer programs. Another client also praises the standard of service that Virgin Atlantic gives in its economy packages, considering the fact that it ‘economy’ is only a low-cost service. There were also customers who were satisfied with the limo pick-up, stating that it was an experience worth remembering.               In other words, Virgin Atlantic boasts creativity. Being innovative is basically one of Branson’s philosophies in business. One example of creativity showed by the company was the avoidance of being a serious corporate company, but instead being a company that offers a lot of fun, has a youthful attitude and an affinity for pop culture ( 2000).   Technology can also be one of the strengths of Virgin Atlantic Airways. Virgin Atlantic is technologically advanced as can be seen by the various technology press releases of the company across the web. For instance, instead of using a dial-up server for IT system, the company upgraded it and invested on a remote server, which basically improved the progress and productivity of the IT team ( 2003). This server cut costs and makes work faster for the company (Whale Communications, 2003). Another example of technological advantage of the company is its investment on EFB or electronic flight bag solutions.   Weaknesses                 The weakness of Virgin Atlantic Airways is that it is not part of any major global alliances. Although it currently has several known partners such as Continental and Singapore airlines, the reach of the company in code-sharing is still limited. The advantages of code-sharing are being enjoyed mostly by members of major global alliances such as Oneworld. The benefits that Virgin Atlantic Airways lack because of the limited codesharing they have include: lack of greater network access; lack of seamless travel; lack of transferable priority status; limited extended lounge access; and the lack of enhanced frequent-flier program (FFP) benefits.               Another weakness of the company is that it lacks transparency, unlike other airline companies in UK and around the world. The company does not publicize annual reports, which may be a disadvantage especially to customers who want to know more about them. The image of the company is not that corporate as it prefers “cool” pop culture approaches. While this may appeal to the younger population, it may not appeal to the more mature customers who prefer their airlines as business-like and as prestigious as possible.               Furthermore, Virgin Atlantic reach only limited countries unlike other global airlines. Currently, it only focuses on eleven sites namely: the UK, the US, Australia, China and others. This shows that company has a limited market reach, which could be a disadvantage.                (2005) reported that other weaknesses of the company include: cash flow (because Branson seems to always need cash. Singapore Air owns 49% of Virgin-Atlantic); Direct Routes (On longer distance flights, Virgin’s expenses can be very high); One Hub (Having only one point to work from is a disadvantage); and Limited Destinations (Virgin has less flight opinions for airline travel).   Opportunities                 The opening of its hub in Lagos, Nigeria is one of the opportunities that Virgin Atlantic should look forward to. Virgin Atlantic is basically one of the few airline companies dedicated in serving African countries. Virgin Atlantic played a role in the gradual liberalisation of the UK/South Africa market over recent year, as it has seen passenger numbers increases by 62% whilst the number of flights has risen by 53%. There are more passengers, more flights, more trade and more choice. It is a win-win situation for everybody. However, the problem is that British Airways and South Africa Airways now carry significantly more passengers than before, despite Virgin Atlantic’s entry into the market (Africa Investor Magazine, 2004). If Virgin would improve their performance and become more market-aggressive in Africa, it might beat British Airways. This is basically an opportunity since only two airlines dominate the continent, while Virgin stays at third. The persistence of the company in penetrating the African market can lead to the establishment of its brand in the continent.               Another opportunity for Virgin Atlantic Airways is that it might have a push on the market with its latest Heathrow Clubhouse. This latest infrastructure may directly appeal upper-class customers, as it contributes to the prestige and first class image of the company.               The increasing number of travelers in the UK is also an opportunity for Virgin Atlantic. The UK air traffic forecasts (1997) predict that there will be 310 million passengers going through UK airports in 2015, up from 129.6 million in 1995. This is a basic opportunity for Virgin Atlantic Airways to increase its customers. However, this can only be done by strategic and aggressive marketing on their part.   Threats                 One of the possible threats to the progress of Virgin Atlantic is the emerging consumer mindset that it is dangerous to ride airlines because they are susceptible to terrorist attacks, just like what happened in the 9/11 incident. Thus, security measures are grave concerns of passengers and this is one of the firsts that they check before deciding to ride an airline.               Another threat is the continued pressure on profits and increase in competition. According to the report of  (2003) on the emergence of airline industry, these increases may force more alliances, specifically mergers and acquisitions, and might even limit companies that lead such consolidations because of market valuations. There may also be concern on limit capacities, specifically on the sizes of seats, or how many passengers an airline can accommodate ( 2003). Further legislations that may force companies like Virgin Atlantic to adjust may be a threat as it may slow down the productivity of the firm’s operations.               Other threats the company might face include over flight restrictions, as changing governments and policies in countries where Virgin occupies airspace could be a problem. Also, another threat is the emergence of new airlines, as there are newly formed ones using Virgin concepts ( 2005).     CULTURAL CHANGE                 Much has been written about the culture of Virgin Atlantic. However, those reports indicate that what  tries to incorporate to his crew is to have a sense of belonging to the company, and a sense of fun. Sense of fun means that while his employees have to work hard, they should also have fun and should be satisfied with what they do and what it can offer them. This same philosophy is being applied to their customers. The management philosophy is:” The management’s philosophy at Virgin Atlantic was to never have a passenger be bored”. Of course, this also goes along with another one of  philosophy: “always keep employees satisfied”.               Over the years, the employees of Virgin Atlantic have been honed to become more professional than they are. Since the company started, it has maintained a culture of professionalism and giving importance to the needs of the customers.               Another culture being molded in Virgin Atlantic over the years is the culture of knowledge. As literatures say, Virgin Atlantic has been dedicated in creating innovative services to customers. They are basically the father of the many “firsts” services in the airline industry. This shows that the culture of the company is one that develops, crafts, and makes good use of the knowledge of its employees. A company that can develop innovative ideas is a company that basically applies good knowledge management strategies.               However, it may face management issues such as the increase of intercultural employees and the management of localized branches. The company not only have to manage a different culture, say for instance the employees in Lagos, it also have to be familiar with the different laws and regulations that that country implements. This indicates that change management could be a necessity to most of the company’s branches today. STRATEGIC MARKETING POSITION OF THE COMPANY     Virgin Atlantic is a company with solid financial performance, good name recognition, and committed leadership. The approach of the company in marketing is simple, as it: “…looks for opportunities where they can offer something better, fresher and more valuable. Virgin moves into areas where the customer has traditionally received a poor deal, and where the competition is complacent. Virgin is pro-active and quick to act, often leaving bigger and more cumbersome organizations in their wake” ( 2005).               Some marketing strategies used by the company include: taking advantage of the Virgin brand;  personal reputation; the Virgin management style of empowerment and minimal layers of management; network of friends and business partners; small board of directors; and no massive global HQ, as well as these new ventures becoming part of a family of businesses, with empowerment to run their own affairs, but still receive help as need from other ventures if required; and sharing of ideas, values, interests and goals (2005).               Another marketing strategy of the company is by emitting a “hip” attitude, and having an affinity for pop and rock culture. This and other strategies are communicated to consumers through different approaches such as: sales and consumer promotions, special vacation packages, direct mail, public relations, special events, Web events, E-mail pushes, database gathering, plane repainting and collateral items. It utilizes media such as: radio; newspaper; trade/professional; direct mail; point -of-purchase; out-of-home; public relations; sales promotion; interactive/on –line; and plane repainting (2000).   INFORMATION SYSTEMS STRATEGY               As mentioned earlier, Virgin Atlantic gives importance to technology upgrade to satisfy the needs of the customers. Some IT strategies of the company are the following: complex and geographically dispersed IT infrastructure, with Microsoft Windows-based Intel servers, Oracle databases, J2EE application servers, and some 4,000 Windows desktops; remote access networks; a global Operational Support System (OSS) that supports more than 70 sites throughout the world and comprises over 200 Compaq servers and around 500 additional critical network devices, including Cisco routers; EFB; and PatchLink Update (give system administrators the ability to assess patch status by groups of computers, application or severity, easing the workload on administrators within the IT department) ( 2004; 2002;  2004).   FUTURE DIRECTIONS               The company is currently seeking out allies strategically and expanding aggressively on other territories such as Africa and Australia. However, some of the problems that company face on those expansions include the tight competition among local airlines, and the competition among popular international airlines such as British airways.               It can be seen that in the future, Virgin will expand more to Asia as the number of competition increases in the West. It can be forecasted that this company will also continue to develop innovative approaches in airline services. On the contrary, it is also possible that imitators of the “Virgin approach” will increase, putting the company in the position of maintaining its uniqueness and standing tall against imitators.   RECOMMENDATIONS                 Based on the analyses conducted on Virgin, one of the recommendations that can be given is that it should globalize the Virgin brand further. The expansion on Nigeria and Australia was the first step, but it should be followed with more aggressive expansions preferably in Asia or South America.   Virgin may also need to expand its own product and service lines and/or aggregate web content from external providers, and also consider alliances and mergers (with telecom companies for example) if the speed of organic growth is insufficient to meet with its required targets.    (2005) reported that Virgin’s dependability on  should be reduced as this will greatly affect the company in the future when Branson retires. Leadership trainings should be conducted early on to hone future leaders that will use and instill Branson’s energy and creativity to the company.           CONCLUSION             This report found out that Virgin Atlantic is a strong brand basically because of its corporate image as member of the Virgin companies, its reputation for corporate service, and its reputation for innovation. However, there are also short-comings that Virgin Atlantic should sort out such as the need to form more alliances, continuous development of innovative ideas of services, and the need to further globalize the brand.               In sum, Virgin Atlantic is currently in a strong competitive advantage with the political, economic, social and technological side of the industry. However, every market is fickle as it changes over time. Changes that Virgin should look at are the new regulations being implemented, regulations on specific countries and their difference from other countries, the increase of competition and imitators, the oil price increase, and the increase or decrease of demand for travel. Branson and the rest of the Virgin Atlantic management crew should keep their eyes peeled for opportunities and threats, because by doing so, it will ensure the safety of the company, its reputation and success.             Credit:ivythesis.typepad.com

BUSINESS REPORT ON VIRGIN ATLANTIC AIRLINES

BUSINESS REPORT ON VIRGIN ATLANTIC AIRLINES According to (2000), the airline industry is a unique and int...

CORPORATE SOCIAL RESPONSIBILITY

Introduction Globalization is the comprehensive term for the emergence of a global society in which economic, political, environmental, and cultural events in one part of the world quickly come to have significance for people in other parts of the world. Globalization is the result of advances in communication, transportation, and information technologies. It describes the growing economic, political, technological, and cultural linkages that connect individuals, communities, businesses, and governments around the world. Globalization also involves the growth of multinational corporations and transnational corporations ( 2004). The international institutions that oversee world trade and finance play an increasingly important role in this era of globalization. Although most people continue to live as citizens of a single nation, they are culturally, materially, and psychologically engaged with the lives of people in other countries as never before ( 2004).   Distant events often have an immediate and significant impact, blurring the boundaries of people’s personal worlds. Items common to people’s everyday lives such as the clothes they wear, the food they eat, and the cars they drive are the products of globalization. Globalization has both negative and positive aspects. Among the negative aspects are the rapid spread of diseases, illicit drugs, crime, terrorism, and uncontrolled migration. Among globalization’s benefits are a sharing of basic knowledge, technology, investments, resources, and ethical values ( 2000). Most experts attribute globalization to improvements in communication, transportation, and information technologies. Advances in communication and information technologies have helped slash the cost of processing business orders by well over 90 percent. Using a computer to do banking on the Internet, for example, costs the banking industry pennies per transaction instead of dollars by traditional methods. Advances in communications instantly unite people around the globe. For example, communications satellites allow global television broadcasts to bring news of faraway events, such as wars and national disasters as well as sports and other forms of entertainment. The Internet, the cell phone, and the fax machine permit instantaneous communication. The World Wide Web and computers that store vast amounts of data allow instant access to information exceeding that of any library ( 2004).   Improvements in transportation are also part of globalization. The world becomes smaller due to next-day delivery by jet airplane. Even slow, oceangoing vessels have streamlined transportation and lowered costs due to innovations such as containerized shipping. Advances in information technologies have also lowered business costs. The global corporation Cisco Systems, for example, is one of the world’s largest companies as measured by its stock market value. Globalization raises other questions that will be central to the 21st century. What is the proper role for the IMF, WTO, and UN, and how should they be governed? What is the best way to finance development? How much autonomy should countries have when the economic, political, and environmental decisions they make can have global repercussions? To what extent should global institutions be able to constrain what countries can and cannot do in an increasingly globalized world? What is the right way to balance social and cultural values with the need for economic efficiency? As the 21st century progresses, more and more decisions regarding these and other issues will need to be debated (2004). Globalization affects the way companies treat its environment. Changes in businesses affect the way they preserve the different things in the environment. The paper will discuss about corporate social responsibility. The paper will also provide a comparison of Bp UK oil refinery and oil refinery in Pakistan. The paper will then discuss the problem the companies follow the corporate social responsibility and what can be done towards it.   Corporate responsibility The process of globalization over the past decade has created unprecedented opportunities for global companies in trade, investment, services, and production. The fact that the rapid pace of growth of economic opportunity has not corresponded with the growth of leadership in business ethics and a sense of corporate responsibility has potentially threatening consequences for the reputation of free market economies and businesses. Public concern is accelerated by a wider use of electronic communications that is changing the nature of politics as much as that of business operations. The leadership of a few progressive companies, the rise in consciousness of corporate responsibility as an essential feature to sustain global capitalism, and emerging evidence of partnership initiatives which hold the key to equitable development, are all encouraging pointers towards progress. Business has the capability of bringing creative and sustainable solutions to many of the ills facing the world such as ill health, illiteracy, and unemployment, and to reinforce freedoms and choice, if it engages in the challenges which will contribute to its long-term sustainability and profitability ( 2003).     The challenge for those engaged in promoting corporate social responsibility is not just to make a compelling business case, as important as that is, but to elevate business values and integrity. It is to spread awareness that one cannot cherry-pick globalization and reap the rewards of open markets without responding to the forces that will ultimately undermine free markets. It is to recognize that responding to the challenges of diversity and transparency is at the heart of successful internationalization of business. It is to dare to appeal to business leaders, in an imperfect world, for values based leadership, decency and integrity, and an absolute commitment to attack corruption as the essential bedrock of business activity with a human face ( 2003).   In a globalizing world, business leaders will need to be more pro-active and progressive. They cannot rely on their business and trade associations that are so often held back by the slowest ship in the convoy, national interests, legalistic defense of rights and lack of vision. The consequences of business and business leaders failing in this challenge will be growing and corrosive public and media cynicism, declining values and respect for property at work, negative activism and efforts to regulate business by international institutions lacking competence and capacity. There has been a vivid demonstration that regulated markets in even the most experienced capitalist economies are tough to set up and run, and that the cost of getting it wrong is corrosive public cynicism of business and hostility towards its leaders ( 2003).  There is not a great deal of evidence that the lessons have been learned or that governments have the capacity or desire to regulate for corporate responsibility, even if opportunistic politicians have the ingenuity to make political capital out of the problems.   Corporate responsibility is a pact for the mutual benefit between society that needs business for economic and social development, and business that needs a supportive business environment. It is also a pact between capital and management in modern companies, which has been as shaken up by some recent scandals where management disregarded the bond of transparency with shareholders. All too often, professional managers and their advisers have been tempted to see the resources of public companies as their own property without the sense of stewardship that owner-managers once had. The balance can only be struck by combining professionalism with transparency ( 2003).   Social Responsibility Social responsibility has acquired an increasingly important role in the practice of corporate management and in corporate decision making. Firms may benefit from socially responsible actions and policies in terms of community reputation of commitment to the public good, enhanced employee morale and productivity, and in terms of stock- and bondholders’ perceptions of management skill at risk reduction as indicated by social responsibility. Companies who show concern for the environment acquires many benefits. Almost everybody believes that corporations should be concerned about something more than making money, that they have responsibilities not only to stockholders but to their employees, to their customers, to the communities in which they work and to society at large. The extent to which social responsibility will continue to influence corporate decision making depends in part on managerial perceptions of the impact of socially responsible actions on the effectiveness of the firm.   Many companies base their socially responsible actions on the belief that these actions provide or will provide some benefit to the company, a strategy referred to as enlightened self-interest ( 1993). The results of several studies support a positive relationship between corporate social responsibility and firm financial performance that used five different measures of financial performance. In the study it concluded that the companies within the pulp and paper industry that had the best record on pollution control and the environment were also the most profitable. However, other studies provide conflicting conclusions, suggesting that firms may incur costs from socially responsible actions that put them at an economic disadvantage compared to other, less responsible firms ( 1993). Consumer and investor concerns about corporate social behavior can be a compelling factor in determining what is in a company’s best interests in terms of their impact on market share. It has been suggested that corporate managers will take social initiatives seriously only when they are convinced that their company’s social record affects market share and thus financial performance maintain that companies fight hard for even a small percentage gain in market share for their products. If and when corporate managers become convinced that their company’s social record affects market share, they will be forced to take social initiatives seriously. One way to ascertain the extent to which companies are and will continue to be committed to corporate social responsibility is to measure the beliefs of top management about the relationship between social initiatives and market share. The role of top management in the integration of social responsibility issues into corporate decision making cannot be overestimated. Progress has been made in assessing managerial attitudes toward corporate social responsibility but little is known about managerial perceptions of the relative importance of social responsibility issues in organizational effectiveness ( 1993).  Social responsibility is not only important for people but businesses as well.   Corporate social responsibility Corporate social responsibility can be defined as the duty of organizations to conduct their business in a manner that respects the rights of individuals and promotes human welfare. While the level of social responsibility exhibited by multinational corporations is said to be improving, perfection has hardly been attained. Governments and people around the world seem to have an increasing interest in scrutinizing the actions of global corporations, in effect forcing international companies to be good corporate citizens. One reason for this could be the realization that multinational companies (MNCs) are not as invincible as they were once thought to be; therefore, their policies can be influenced to benefit society. A second reason may be a realization that effective legal governance of companies whose activities stretch beyond national borders is impossible, leaving self governance as the only practical alternative. Social responsibility in business has been debated for a long time, and several sides of the issue have been presented by ethicists. This debate has been extended in recent years to include the operations of MNCs ( 1995). About public interest in business ethics and corporate social responsibility (CSR) during the past three or four decades, two conclusions can be drawn. First, interest in business ethics and social responsibility has heightened during each of the past forty years. Second, interest in business ethics and CSR seems to have been spurred by major headline-grabbing scandals. Certainly, society has taken an on-again, off-again interest, but lately this interest has grown to a preoccupation or obsession ( 2003).   Because of ethical missteps like those just alluded to, business has been undergoing the most intense scrutiny it has ever received from the public. As a result of the many allegations and charges that it has little concern for the consumer, cares nothing about the deteriorating social order, has no concept of acceptable behavior, and is indifferent to the problems of minorities and the environment concern continues to be expressed as to what responsibilities business has to the society in which it resides. These concerns have generated an unprecedented number of pleas for CSR, more recently included in the broad term of corporate citizenship. No one would argue that life in most business organizations was much simpler in the past, in a less complex period, with minimal and clearly understood expectations among the various parties. Investors put up money to start or finance the business, owners and employees kept the business running, suppliers made raw materials available for production, and customers purchased the product or services. In today’s society, organizations face a more complex state of affairs. The public recognizes that today’s business organization has evolved to a point where it is no longer the sole property or interest of the founder, the founder’s family, or even a group of owner-investors. That development has been a principal driving force behind this societal transformation (2003).    Organizational management that truly cares about business and corporate social responsibility is proactive rather than reactive in linking strategic action and ethics. It steers away from ethically and morally questionable business opportunities and business practices. It goes to considerable lengths to ensure that its actions reflect integrity and high ethical standards. If an organization’s stakeholders conclude that management is not measuring up to ethical standards, they have recourse. For example, concerned investors can protest at the annual shareholders’ meeting, appeal to the board of directors, or sell their stock. Concerned employees can unionize and bargain collectively, or they can seek employment elsewhere. Customers can switch to competitors. Suppliers can find other buyers. The community and society can do anything from staging protest marches and urging boycotts to stimulating political and governmental action ( 2003).   Petroleum and the petroleum industry Petroleum, or crude oil, naturally occurring oily, bituminous liquid composed of various organic chemicals. It is found in large quantities below the surface of Earth and is used as a fuel and as a raw material in the chemical industry. Modern industrial societies use it primarily to achieve a degree of mobile both on land, at sea, and in the air that was barely imaginable less than 100 years ago. In addition, petroleum and its derivatives are used in the manufacture of medicines and fertilizers, foodstuffs, plastics, building materials, paints, and cloth and to generate electricity. The United States petroleum industry is composed of tens of thousands of separate businesses, covering an enormous range in size, influence, and breadth of operations ( 1959).   Its behavior is governed not merely by the profit-seeking activities of these private parties, but also in vital ways by a network of governmental controls, direct and indirect, state and national agencies that regulate output, providing differential tax treatment in the way of special exemptions and levies, fixing prices, limiting international commerce, as well as merely persuading, threatening, or cajoling managers into one course of action or another. This aggregation of separate business entities, thus organized and controlled, is expected to safeguard the national defense, conserve scarce resources, reduce prices, improve quality, expand capacity, and protect the competitive status of thousands of private parties whose interests are often flatly opposed. The diversity of these influences on industry behavior and the complexity of these tests of good and bad performance preclude a simple verdict in assessing the charges and counterclaims of waste and monopoly, conservation and competition that have plagued the industry during the entire course of its history ( 1959).   Modern industrial civilization depends on petroleum and its products; the physical structure and way of life of the suburban communities that surround the great cities are the result of an ample and inexpensive supply of petroleum. In addition, the goals of developing countries to exploit their natural resources and to supply foodstuffs for the mushrooming populations are based on the assumption of petroleum availability. In recent years, however, the worldwide availability of petroleum has steadily declined and its relative cost has increased. Many experts forecast that petroleum will no longer be a common commercial material by the mid-21st century. Petroleum is formed under Earth’s surface by the decomposition of marine organisms. The remains of tiny organisms that live in the sea and, to a lesser extent, those of land organisms that are carried down to the sea in rivers and of plants that grow on the ocean bottoms, this are enmeshed with the fine sands and silts that settle to the bottom in quiet sea basins. Such deposits, which are rich in organic materials, become the source rocks for the generation of crude oil. Once the petroleum forms, it flows upward in Earth’s crust because it has a lower density than the brines that saturate the interstices of the shales, sands, and carbonate rocks that constitute the crust of Earth ( 1959).   The crude oil and natural gas rise into the microscopic pores of the coarser sediments lying above. Frequently, the rising material encounters an impermeable shale or dense layer of rock that prevents further migration; the oil has become trapped, and a reservoir of petroleum is formed. A significant amount of the upward-migrating oil, however, does not encounter impermeable rock but instead flows out at the surface of Earth or onto the ocean floor. Surface deposits also include bituminous lakes and escaping natural gas. In order to find crude oil underground, geologists must search for a sedimentary basin in which shales rich in organic material have been buried for a sufficiently long time for petroleum to have formed. The petroleum must also have had an opportunity to migrate into porous traps that are capable of holding large amounts of fluid. The occurrence of crude oil in Earth’s crust is limited both by these conditions, which must be met simultaneously, and by the time span of tens of millions to a hundred million years required for the oil’s formation ( 1959).   Petrochemicals are manufactured from naturally occurring crude oils and gases. Once removed from the earth, the crude oil is refined into gasoline, heating oil, kerosene, plastics, textile fibers, coatings, adhesives, drugs, pesticides, and fertilizers. Crude oil contains thousands of natural organic chemicals. These are separated by distilling, or boiling off, the compounds at different temperatures. Gases such as methane, ethane, and propane are also released. Methane, when combined with nitrogen and pressurized and heated, yields ammonia, an important ingredient in fertilizers. Simple plastic materials, such as polyethylene and polypropylene, are manufactured by first heating ethane and propane gases and then rapidly cooling them to alter their chemical structure (1991).   ARL Attock Group of Companies is the only fully integrated group in the Petroleum sector of Pakistan. Attock Group deals in exploration, refining, and marketing of petroleum products that makes it the most reliable and resilient operator in the industry. Attock Refinery Limited (ARL) is the pioneer in crude oil refining in Pakistan with its operations dating back to 1922. Backed by a rich experience of more than 80 years of successful operations, ARL’s plants have been gradually upgraded with state-of-the-art hardware to remain competitive and meet new challenges and requirements. The Attock Group of Companies comprises of the Attock Oil Company Limited (AOC), Attock Refinery Limited (ARL), Pakistan Oilfields Limited (POL) and Attock Petroleum Limited (APL). AOC is registered in UK and supervising the overall business of Attock Group in Pakistan. POL is engaged in exploration, drilling, production, and transmission of petroleum and related activities. POL has provided channels to transport crude oil to ARL through its pipeline network from not only its own oilfields but also from some other oilfields. ARL has the ability to refine the crude oil received from POL as well as eighteen (18) other exploration companies.   The refined petroleum products are then sold to Operation and Maintenance Center (OMCs) operating in Pakistan that also includes APL, which is operating as an OMC since 1998. ARL’s configuration allows it to process crude to produce a complete range of petroleum products from LPG to Asphalt including specialty products such as Jet Fuels (Jet A 1, JP-4, and JP-8) Cutback Asphalts, Polymer Modified Asphalt, Mineral Turpentine Oil and Solvent Oil. ARL’s current nameplate capacity stands at 37,500 Barrels per day (BPD) but is currently operating at around 43,000 BPD.   ARL is strategically located in the Oil and energy sector providing petroleum products to the Northern Region of the country and simultaneously providing an outlet to crude oil produced in the Potohar Region of Pakistan. ARL is enormously contributing towards the economy of Pakistan in different manner that includes supplying of things like of petroleum products to Civil and defense market including Airlines, Railways, Power stations, Cement and other industries; providing an outlet to indigenous production of crude oil in Pakistan and particularly from the Potohar Region otherwise required be exporting or transporting at huge cost; generation of government duties/taxes on supply of petroleum products including General Sales Tax; generation of foreign exchange earnings through petroleum products exports including Naphtha/Jet Fuels exports; and providing employment and work opportunities in the Refinery including deployment of large transportation fleet of crude oil and products movement.   The company’s most valuable asset is their people.  Implementation of HR best practices has enabled them to induct and retain honest, competent, committed and motivated team players. Their employees take pride in their lifetime relationship with the organization, employee turnover is negligible and one can find numerous examples of generation after generation employment at ARL. The company has a systematic and well thought out Management Development Plan and they help the employees in keeping them fully abreast of the latest knowledge and skills through in-house and out-sourced training and development programs. ARL Management Development Center (MDC) caters for the employees training initiatives. ARL is an equal opportunity employer. They offer excellent career opportunities at market based compensation packages for the best available talent.  They recognize the professionalism of the employees as one of the foundations of the company’s corporate strength, and ensure the fullest possible utilization of their employees’ initiative through provision of working environment, that is conducive. The company continues to be a leader of the industry in the areas of provision of employee benefits, and having cordial industrial relations.   ARL and CSR ARL promotes sustainable community development as part of its core values to create the foundation for a more equitable, just, productive, competitive and knowledge-based environment. As a responsible corporate citizen, ARL has always believed in working as part of community and has made sizeable contributions for projects in the field of environment, health, income generation, women development, HRD, education and sports.  Besides being the right thing to do, ARL believes that’s its investments in CSR benefit the company’s bottom line.  Spending the time and resources on environmental performance improvements, fostering relationships based on trust and respect with key stakeholders and working with local communities to ensure they share in the benefits of the businesses and are simply part of good business practice.  Some of the benefits can be backed up with numbers, while others are less easily measured and therefore less easily linked to the bottom line.  CSR has helped enhance ARL’s reputation, which builds credibility and trust with stakeholders at all levels, and these are valuable assets.  While acquiring the latest state of the art facilities ARL has never been oblivious to the human factor and has been in the forefront to discharge its CSR.   ARL since its establishment in 1922 has played a significant impact on the Morgah and Kotha Kalan communities. ARL is making a sincere effort to involve local community in development projects, focusing on capacity building rather than traditional donor-beneficiary relationships. Provision of water, carpeted roads, playing grounds, culverts, and parks etc. has not only resulted in poverty alleviation and improving lifestyle of the locals but has also helped ARL in expanding its operations through the support of the local population. ARL has a Vision and Values Statement that sets forth the company’s values. The three top most core values are linked with CSR includes Integrity & Ethics, Quality and Social Responsibility. These are supported by concrete guiding principles that allow employees to understand what they mean and how the values relate to their day-to-day work. The Vision, Mission and Values Statements were developed through consensus at all levels within the company, which also helped garner employee buy-in and understanding.   BP BP Amoco p.l.c. is an international petroleum, gas, and chemical company, based in London, England. Formerly known as The British Petroleum Company PLC (BP), the company merged with Amoco Corporation in 1998 and adopted its current name. BP Amoco is one of the world’s largest oil companies. It explores for oil and natural gas in Latin America, North America, the North Sea, North Africa, Southeast Asia, and Central Asia. The company operates major refineries around the world and markets its products in more than 100 countries. It holds a half-interest in the Trans-Alaska Pipeline, which transports oils from fields in northern Alaska to the port of Valdez in southern Alaska. In 1999 BP Amoco announced its plans to acquire Atlantic Richfield Company (Arco), a petroleum and natural gas company based in Los Angeles, California. In 1901 British mining magnate  received permission from the shah of Iran to look for petroleum throughout the shah’s empire.    In 1908 ’s geologists discovered oil in southwest Persia the first commercial oil discovery in the Middle East. In a joint venture with the Burmah Oil Company,  formed the Anglo-Persian Oil Company in 1909. In 1914 the company signed an agreement with the British government under which the government purchased 51 percent of the company’s shares and acquired two seats on its board of directors. Despite the government’s majority ownership, which continued until Britain sold off the last of its shares in 1987, Anglo-Persian continued to operate as an independent company ( 2001)   Anglo-Persian profited from the discovery of major oil fields in Iraq in 1927 and in Kuwait in 1938. The company was renamed Anglo-Iranian Oil Company in 1935. Its favorable arrangement with Iran, however, was challenged by the country’s nationalist government in the 1940s. In 1951 the government of Iranian premier  took control of Anglo-Iranian’s oil fields in Iran. For three years the company ceased production in Iran, where its largest oil field was located. In 1953  and other nationalists in the Iranian Parliament moved to seize power from  , the shah of Iran. The shah fled the country, but within a few days a coup, in which the British and U.S. secret services reportedly played a role, returned the shah to power. A new agreement, reached in 1954, made the company a 40-percent shareholder in a consortium of Western oil companies drilling in Iran. The company was renamed The British Petroleum Company PLC that same year.    Discoveries in Alaska in 1969 and the North Sea in 1970 made the company one of the largest producers of oil and natural gas in the western hemisphere. The difficulties of extracting oil in such extreme environments made BP a leader in oil-field technology and contributed to its later successes in extracting crude oil from reserves in the Sahara, the Gulf of Mexico, and Papua New Guinea ( 2001) Beginning in the 1970s, the company pursued a strategy of diversification, acquiring companies that engage in food processing, mining, and computing services. However, in the late 1980s BP began to sell its peripheral businesses to concentrate on its core businesses in petroleum and chemicals. In 1994 BP discovered 100 million cubic meters of gas reserves in Colombia. In August 1998 BP announced it would acquire Amoco, the largest supplier of gas in North America. Federal regulators approved the deal, valued at approximately billion, by the end of 1998. A few months later, in 1999, BP Amoco announced its plans to acquire Arco for about .8 billion. In 2000, after meeting certain requirements by the United States Federal Trade Commission (FTC), the deal was completed ( 2001)   BP and CSR The company believes that it can and it will play a part in finding issues associated with sustained development.  It also believes that the company is a part of the solution and not the main solution to the problems in the environment. The company makes sure that it reports its greenhouse gas and other emissions, oil spillages, employee satisfaction, days lost through injury at work, and community investment all over the world. The company’s policy statement commits the company to achieve its business goals. The reporting done by the company helps in illustrating the company principles.   Business and the environment Society’s attitude to environmental matters has evolved with the other changes. These changes should be seen alongside striking changes in the values, ethics, morals and beliefs held by society, which have themselves largely been a consequence of industrialization and urbanization. New lines of communication, the changing role of the media, education, and a shift from the need for survival to a desire for an improved quality of life-at least in Western societies-has changed people’s views of what is important. The rise of environmentalism has influenced the views of the individual and these have put pressure on business to change. Two hundred years ago there were no environmentalists as people know them today. Gradually, their views have shaped society’s attitude to the environment and to the impact that business has had on the environment. Business activities have an impact on the environment. This occurs through pollution, the modification of ecosystems, introducing exotic species and chemical compounds, genetic engineering and irreversible physical changes. The sorts of impacts widely reported in the popular press and television. The ways in which land has been used, particularly for agriculture and forestry, are a reflection of the way in which the commercial pressures of business have changed the physical landscape.   Business affects the environment in a variety of ways both deliberate and accidental ( 2001).  Most of the effects are usually seen as detrimental, although increasingly people see some business activity improving the environment. For example, a number of museums and country houses have been opened to the public where the restoration of former days of glory have halted decades of decline and reinstated previous, albeit not entirely natural, surroundings. However, many firms who claim to be improving the environment are in reality only mitigating against the most injurious impacts of what is occurring.   Hence the practice of planting trees and landscaping around industrial plants is not improving the environment but merely reducing the detrimental effects of building the plant in the first place. Second, but less obvious, are the impacts the environment has on business. Changes in climate have led to changes in business activity. Depleting resources or physical limitations on the use of some materials have changed patterns of exploitation and their uses. Changing environmental conditions have led to the birth of new industries. Although less widespread and less covered by the literature, these changes are still worthy of people’s attention (2001).   Third, business activities are influenced by environmental concerns. It is hard to identify a business where environmental concerns have no impact on its operations. For most businesses, environmental issues are less important than other external influences such as the state of the economy or the behavior of its competitors. For some, which are close to the environment such as agriculture or tourism, the impacts can be at the top of their agenda. Environmental legislation, customer attitudes to the environment along with direct actions by environmental groups are among the most obvious influences which can be grouped together under the umbrella term of environmentalism. Environmentalism has a considerable impact on many individual businesses. Businesses are increasingly aware of public pressure to have due regard for the environment and now many have corporate policies that are either sympathetic, or pro-active, to environmental aims. Fourth, business has worked hard to influence public opinion about the environment. While many such actions can be seen merely as window dressing, many business opportunities have been seized to pro-actively develop products and services resulting in environmental improvement. Business has actively promoted some of its activities in terms of the environmental benefits they have brought (2001).  There are different effects of production and use of oil in the environment. This includes pollution; oil contamination of sea; the modification of ecosystems, introducing exotic species and chemical compounds, genetic engineering and irreversible physical changes.   Oil Pollution The oceans have traditionally been the ultimate dump for many of humanity’s noxious wastes. Some pollutants are pumped into them directly from ships or are discharged from coastal facilities. Others are carried into the oceans by rivers or fall from the atmosphere with precipitation. Among the major types of pollutants that have been released into the oceans are sewage from municipal systems; the herbicides, pesticides, and fertilizers that run off agricultural land; a great variety of industrial wastes such as mercury, lead, and other heavy metals; radioactive materials from nuclear power plants and weapons production; and petroleum and other oily substances, upon which this case study will focus. This different wastes has different and often than not negative environment to the environment. Until recently, it was thought that the oceans were vast enough to disperse and neutralize these substances without significant harm to the environment. Such complacency is no longer warranted in view of growing evidence of significant damage to the marine environment from pollutants, especially in certain coastal areas ( 1985).  Oil pollution has become a serious problem with the dramatic increase in the world consumption of petroleum occurring since World War II. Simultaneously, there has been an even more rapid rate of growth in the international trade in oil, most of which is transported over the seas. However, shipping accounts for only slightly more than one-third of the petroleum hydrocarbons entering the oceans. Over half of that pollution comes from land sources, such as industries and refineries. Approximately 10 percent seeps up naturally from the ocean floor, and although offshore drilling accounts for only about 1 percent of the oil pollution, spectacular blowouts such as the ones that took place in the Santa Barbara Channel in 1969 and in the Gulf of Mexico in 1979 can have serious impacts on the local environment (1985).   Most of the pollution attributable to shipping results from the operation of the world’s gigantic fleet of oil tankers. Relatively small amounts come from other vessels that use petroleum as a power source. Over the past fifteen years, various types of accidents involving tankers have resulted in numerous oil spills. Because of their immense size, supertankers are difficult to maneuver and are prone to mechanical and structural failures. Collisions become more frequent as waterways are increasingly congested, and groundings are not uncommon where there are treacherous geological features and severe storms. And volatile gasses remaining in emptied tanks have caused a number of spectacular explosions. As dramatic as these shipwrecks have been, accidents account for only 5 to 10 percent of the ship-related oil pollution. 24 Much greater quantities of oily substances are discharged intentionally from vessels as part of their routine operations ( 1985).   After the cargo of oil is removed, some of the empty tanks are filled with sea water, which serves as ballast to keep the vessel stable on its return trip. Prior to reloading, the ballast water is pumped out and returned to the ocean mixed with the leftover oil that coated the insides of the tanks. It has also been a common practice on return trips to wash some of the empty tanks to remove sludge and to dispose of the oily residues by discharging them directly into the oceans. The seriousness of the environmental damage resulting from oil pollution has been a matter of dispute among scientists. It is apparent that much depends upon the type of oil that is spilled and the local conditions. Under favorable circumstances, much of the oil will evaporate rather quickly or be dispersed by wind and wave action ( 1985).   Modifying Ecosystems Like any other creatures, human beings have always had some effect on the ecological systems of which they were a part, but the history of deliberate and significant modification of ecosystems doubtless began with the development of agriculture.  Since then, human influence has reached to the remotest areas of the planet and has been intensified by increasing numbers of people and the development of modern technology. What are some of the ways in which humanity modifies ecological systems? Obviously, some ecosystems are destroyed outright by such diverse activities as clearing land to plant crops, starting fires, building dams, applying defoliants to jungles, constructing buildings, and laying pavement. Forests are chopped down for structural wood and firewood.  Estuaries are dredged, filled, or altered by bulkheads.  And ecosystems can be destroyed as a part of military strategy ( 1997).    The effects of such assaults are diverse. Paved areas are normally removed from natural systems for long periods and their rapid reclamation is both costly and difficult. Dams take land out of terrestrial systems for long periods, but as noted earlier, dams are temporary structures, and enriched land will eventually be returned. Strip-mined areas in developed countries often have not been reclaimed; the practicability of doing so at all is a function of both economics and ecology. When prairie is converted to cornfield, an unstable ecosystem replaces a stable one. Attempts to stabilize such systems artificially can lead to further destabilization and bring about changes elsewhere as well ( 1997).   Physical assaults on ecosystems often interact with overexploitation and pollution to threaten species with extinction. For example, industrial and harbor development encroaching on breeding areas is combining with oil pollution and competition from the fishing industry to deplete South African jackass penguin populations already reduced in size by overexploitation of the bird’s eggs and disruption  of their breeding activities ( 1997). Now that ecologists are gaining a more detailed understanding of the factors that threaten ecosystems, they are beginning to examine carefully strategies for preserving natural diversity. Especially interesting have been attempts to develop a guideline for location, number, size, and configuration of natural reserves, based on the theory of island biogeography. Application of the principles uncovered will require a commitment to conservation and a halt to human expansion while there are significant wild areas left to conserve ( 1997). Due to these different problems that oil production can create; an interview with companies was done to create effective CSR strategies.   The results of the interview When the respondents were asked regarding whether or not the organization has responsibility over the stakeholders. The resounding answer was yes. With regards to the type of interaction with the stakeholders the reply varies on each respondents. Some interact through EGM, AGM. Others through BOD meetings; some interact through focus group. The respondents interact with stakeholders through meetings, queries, hotline, survey and response. The respondents were asked about what they think among corporate governance, business ethical principles, environment compliance, disclosure environmental and social report, product integrity, community investment, stakeholder dialogue, financial performance, and supply chain security shows that the company is socially responsible.  Among these things the respondents believed that business ethical principles, environment compliance and product integrity showed that the company is responsible. The respondents were asked about what community initiatives the company was involved in. They replied that the company was involved in 4 schools, upgrades to state of the art technology that will benefit the society, drinking water treatment plant that satisfies WHO standards, environment awareness, sports participation and capacity building.   The respondents are asked about where they base their purchasing decisions. The replies of the respondents were energy efficient products, environment friendly products, and recycle ability. The respondents were asked on consideration for product quality. Their reply includes durability, international standards for products and services, products meet customer requirement, and customers and their rights. The respondents were asked about what different things the company does to improve the environmental conditions. The respondents replied that the company does things that include re-cycling, reuse, product safety, and waste minimization. By doing these things the company can prevent the different problems brought about by oil creation and usage. The company can also have a better image towards its clients and the society.   CSR strategies Companies can make use of different strategies to show that they have corporate social responsibility. By showing that they are responsible and are socially active more people are encouraged to buy the different things the company offers. Two things can show that the company has corporate social responsibility. This includes engaging in recycling and waste minimization.   Recycling Material and energy utilization can be improved by reuse in the same or another system. This avoids the energy and waste costs of mining or creating virgin materials. The potential savings from this have always been realized for many expensive materials, which have been recycled for decades or centuries. There is now the opportunity to extend the principle into all business sectors, including the manufacturing, construction, office, retail, and service sectors, as well as to individual households. It is important to realize, however, that eco-efficient recycling is that which maximizes the financial value of materials and minimizes the environmental effects of their processing. Recycling is environmentally unproductive when the amount of energy, materials, and pollution used in collecting, preparing, and processing the recyclate exceeds the impact of the system that delivers the primary materials. This can be determined by a life cycle analysis (LCA).   Financial costs and benefits can be assessed by traditional methods. Of course, there are situations where recycling is environmentally justified but unprofitable. It is difficult for individual companies to take action in these circumstances; experience suggests that the best response is some combination of partnership with other companies, communities, or governments and / or redesign of products to change the economics ( 2000). There are also different kinds of recycling. One option is to reuse components or materials.   This retains the value created by their original manufacture and avoids the environmental impact associated with making them suitable for other uses and with producing replacements. Another is remanufacture, which also has these benefits albeit with the higher cost and impact associated with the remanufacturing processing. Four further options are recycling the material to an alternative use, incineration to utilize its energy content, composting, and biogasification. The best option for a particular situation will vary, for example, if reuse, remanufacturing and recycling involve long-distance transport of low-value materials (2000).   Companies such as Hewlett-Packard and Xerox have certainly found that reusing equipment and parts makes both environmental and business sense. Other electronic manufacturers are likely to follow them as economic incentives are joined by take back legislation making them responsible for the final disposal of their products. Hewlett-Packard, for example, created its Hardware Recycling Organization to process excess products and parts into useful service parts by disassembling and refurbishing them. This program improves HP’s service levels by increasing the availability of parts, while lowering costs. Parts that cannot be used for service are sorted and diverted to lower-level; noncompetitive recovery channels ( 2000).   Waste minimization Reducing the amount of waste produced at the source is the only permanent and practical solution to the myriad of problems caused by environmental pollutants. Additionally, pollution prevention and designing for the environment makes economic sense; today’s generators are tomorrow’s potentially responsible parties with legal liability even if current regulations are followed. Pollution prevention means source reduction. Waste minimization means the reduction, to the extent feasible, of any solid or hazardous waste prior to any treatment, storage, or disposal. Waste reduction means the reduction of volume, and or toxicity, of waste after the waste has been generated and prior to disposal. The waste management hierarchy places pollution prevention or source reduction as the top priority in waste management decisions ( 1997).   The waste management hierarchy is source reduction followed by recycling. If these two preferred options are not possible then waste treatment should be considered before the final and least preferable option of disposal is considered. Pollution prevention and waste minimization techniques can be broken down into two major categories: source reduction and recycling. It should be pointed out that waste minimization does not include such processes as incineration, treatment, storage or disposal. Source reduction and recycling should always be considered before treatment and/or disposal. Source Reduction includes inventory control, improved housekeeping, production/process modifications, product substitution or reformulation, waste segregation and new uses ( 1997).   Conclusion In a globalizing world, business leaders will need to be more pro-active and progressive. They cannot rely on their business and trade associations that are so often held back by the slowest ship in the convoy, national interests, legalistic defense of rights and lack of vision. Business activities have an impact on the environment. This occurs through pollution, the modification of ecosystems, introducing exotic species and chemical compounds, genetic engineering and irreversible physical changes. An interview was made and the respondents were asked about what they think among corporate governance, business ethical principles, environment compliance, disclosure environmental and social report, product integrity, community investment, stakeholder dialogue, financial performance, and supply chain security shows that the company is socially responsible.  Among these things the respondents believed that business ethical principles, environment compliance and product integrity showed that the company is responsible. The respondents were asked the different things the company does to improve the environmental conditions. The respondents replied that the company does re-cycling, reuse, product safety, and waste minimization. References Credit:ivythesis.typepad.com

CORPORATE SOCIAL RESPONSIBILITY

Introduction Globalization is the comprehensive term for the emergence of a global society in which economic, political, environmental, a...