| Virgin America is breaking new ground when it comes | | | | that Virgin America is planning on using Differentiation |
| to IT infrastructure*. Virgin America is planning on | | | | strategy. To start off they have a well known brand |
| reducing it’s IT related costs by mainly outsourcing | | | | ‘Virgin’ that is widely recognized in US. They |
| everything including customer support. Instead of | | | | also intend on using ‘plush’ features on their |
| mainframes that is used by the other airlines, they are | | | | airplane (like leather seats, entertain system etc.) to |
| using Linux based servers. | | | | make the in-flight experience comfortable. Thus they |
| Before we applaud this move as ‘out of the | | | | are planning on leveraging Virgin brand as an upscale |
| box’ thinking, let’s evaluate this from the | | | | experience. Superior ‘flying experience’ is the |
| company’s business strategy perspective. | | | | only way they are going to survive this airline industry. |
| According to Micheal Porter** there are 2 types of | | | | Crowded airports and runway along with long lines at |
| competitive advantage which a company can utilize to | | | | security is making travelers long for a comfortable |
| build ‘economic moat’. | | | | flying experience and may be willing to pay higher price |
| 1. Cost Advantage | | | | for that experience. Who are these customers? This |
| 2. Differentiation Advantage | | | | is where gathering customer related information |
| If Virgin America is planning on using Cost Advantage | | | | becomes very vital. Ferreting out intelligence from that |
| strategy then they are setting themselves to fail. In the | | | | information is equally critical. Virgin America needs to |
| overcrowded airline industry especially in the US there | | | | start investing in CRM, Data Warehousing and BI tools |
| is cutthroat competition for being the low cost carrier. | | | | to identify the right customers. They can get away by |
| Southwest has a proven successful model and it is | | | | outsourcing initially. But as the data grows, depending |
| difficult to beat them on the merits of cost advantage | | | | on an outsourced company to provide the |
| by itself. Many airlines have tried in the past and have | | | | infrastructure to gather the intelligence from information |
| failed. Jet blue might be the only exception. | | | | is extremely risky proposition. Never outsource your |
| But based on other Virgin products, it appears viable | | | | core competency! |