Competition in the Construction Industry: Laing O’Rourke

Competition in the Construction Industry: Laing O’Rourke Select one construction firm and explain the nature of competition in its specific market sector and discuss how it may be advised to secure contracts for future work. Laing O’Rourke is the United Kingdom’s largest privately owned construction firm; it operates internationally across a variety of different sectors within the construction industry. Formerly known as R. O’Rourke Son until its takeover of Laing Construction in 2001, Laing O’Rourke is one of the leading construction firms in the UK. The firm has a strong standing in sectors including, building, transport, power, water and utilities, mining, oil and gas. (Laing O’Rourke, 2014). This firm operates heavily in the private sector, with investments from large scale hotel operators, for example the Atlantis hotel, The Palm, Dubai; to football stadium developments, such as the recent expansion of the Etihad Stadium in Manchester. (Prior, 2014). Laing O’Rourke also engages in a substantial amount of work in the public sector, (Laing O’Rourke, 2014) however over recent years the borders between the private sector and public sector have been blurred to a point where often only a specification is given by the public sector client and the financing, design, build and maintenance is taken on by the private sector firm (Myers, 2013). This method’s popularity has soared over the last 20 years mainly due to the dwindling amount of capital readily available to the public sector and also to the public sectors keenness to utilise as much of the firm’s specialist expertise and experience. This method of public sector and private sector partnership (Myers, 2013) is known as a Private Finance Initiative (PFI) and is often used for projects such as schools, infrastructure, and hospitals. All types of developments which Laing O’Rourke has recently undertaken. The contracts run for roughly 25 – 30 ye ars (Myers, 2013) and so capitalises on the strengths of both sectors; the specifications and requirements coming from the public sector client, and the development and maintenance aspects being handled by the private sector firm. Because the private sector firm has had to invest its own assets into the PFI project, the public sector client pays an annual charge to the private sector firm or can allow the firm to retain any profits made from the operation (Myers, 2013). This method legally ties the contractor to the project and thus greatly increases the likelihood of the firm delivering a high quality product. As they are responsible for the maintenance and running costs, (Myers, 2013) it is in the firms best interests to create a product which will not require a great deal of additional financial input to maintain. Laing O’Rourke operates across most aspects of what Myers (2013) considers to be the broad definition of the construction industry. This ranges from suppliers of basic materials to the providers of services such as transportation and demolition (Myers, 2013). Laing O’Rourke as a whole are capable of operating across such an expanse of sectors in the construction industry through the use of subsidiary companies. These are firms or departments which Laing O’Rourke has either created within the firm itself or purchased and brought under the Laing O’Rourke umbrella and allows for an entire construction project to be completed using only one large contractor, themselves, instead of having to hire in sub-contractors and other professionals. This has a number of advantages as it means that from day one there can be excellent communication between everyone involved and consistency with aspects such as quality, pricing, budget and time management (Laing O’Rourke, 2014). Most small firms specialise in a certain aspect of construction, such as building or civil engineering (Ive Gruneberg, 2000) but not usually a multitude of aspects. Laing O’Rourke is a major firm which owns different subsidiary companies within s ub-industries which are of particularly good use to the parent company. The firm currently owns a total of 17 subsidiaries (FAME, 2014). An example of this practise would be that if Laing O’Rourke were to purchase or develop a steel fabrication firm and bring it under its control then all the steel work could be sourced from that arm of the company and sent to site at internal reduced costs instead of paying a higher price for an independent firm to provide the resources. This allows for a substantial reduction in overall cost and lead time during the construction process and would no doubt have the potential to have a positive environmental effect. Laing O’Rourke have taken this practise a step further and have delved into the mining industry. They are responsible for some construction materials from their initial removal from the ground all the way up to their installation on site. Laing O’Rourke have been mining materials such as coal, iron ore, zinc, bauxite, alumina, diamond, and copper for over 40 years in Australia (Laing O’Rourke, 2014). Since Laing O’Rourke acquired Crown House Technologies and Barclay Mowlem in 2004 and 2006 respectively (Laing O’Rourke, 2014), they have completed some of the most recognisable and both culturally and economically significant building projects in the world. The firm was responsible for the construction works for the half a billion pound regeneration project known as Liverpool One, in Liverpool in 2008 to mark the city’s celebration as the European capital of culture. The project has been hailed as a great success, improved the local economy and transformed the image of the city almost in its entirety. (Laing O’Rourke, 2014). The size and range of Laing O’Rourke’s operations position the firm in a sector of the market which can be described as an oligopoly. Cooke (1996) wrote that â€Å"Oligopolistic industries are characterised by a small number of firms accounting for a large proportion (or all) of total output.† Laing O’Rourke is one of a relatively small number of firms that is responsible for a very large proportion of all construction work. This raises an interesting point as the industry is in fact dominated by a large number of small firms (Cooke, 1996). This is mainly due to the construction industry being location specific. The resources and materials for a project may all come from static factories, but the actual construction activity itself must always take place on the site itself, such is the nature of construction (Cooke, 1996). This is even the case where an entire building may be produced using prefabricated components, the actual coming together of the parts will happen on site. This is where a firm like Laing O’Rourke will utilise the smaller, more location specific firms to aid in their efforts. These smaller firms operate in an area of the market which could be described more as monopolistic competition, even bordering on perfect competition in places. Cooke (1996) describes monopolistic competition as: â€Å"Monopolistic competition exists when a large number of firms are operating in a particular market but, unlike perfect competition, each producer offers the customer a slightly differentiated product†¦ or when firms offering a similar product are located in different geographical areas† This oligopolistic competition at the top end of the construction industry has meant that the top 50 construction firms in the UK, sometimes even the top 10, are usually the same familiar names, granted they regularly overtake one another year to year as the market can often be volatile and firms can easily lose out financially if a project has not gone well. This was touched on earlier where most of the construction work carried out on a whole is actually by a small amount of large firms. Construction can be a very lucrative business even on a small scale. Therefore the amount of money passing through the accounts of a firm the size of Laing O’Rourke is phenomenal. This section will look into some aspects of the firm’s accounts, which are readily available to the public as the firm is a limited company. Parker (1999) states that all company balance sheets are built up from three main categories; assets, liabilities and shareholders’ funds. â€Å"Assets can be defined as rights or other access to future economic benefits controlled by a company as a result of past transactions or other events.† Current assets are assets which are to not be put back into the firm. This includes mainly cash, debtors and stocks (Parker, 1999). In contrast, fixed assets are assets which are to be used in the continued operations and growth of the firm. The total assets can be found by combining the fixed and current assets. The net assets can be found by subtracting the current liabilities from the total assets. Table 1. below shows the total assets and net assets for the years 2012 and 2013. Table 1. Balance Sheet – Laing O’Rourke 2013 2012 Total Assets  £255,100,000 +  £929,700,000 =  £1,184,800,000  £250,300,000 +  £970,000,000 =  £1,220,300,000 Net Assets  £1,184,800,000  £865,400,000 =  £319,400,000  £1,220,300,000  £914,400,000 =  £305,900,000 Source: FAME, 2014 It can be seen that the total assets have dropped from 2012 to 2013, however the fixed assets actually grew by  £4.7 million and the current assets dropped by  £40.3 million. This shows that more money was allocated to be put back into the company in 2013 than it was in 2012. The net assets show a growth of nearly  £15 million. Below; Table 2 shows similar look into another large construction firm Carillion. Table 2. Balance Sheet – Carillion 2013 2012 Total Assets  £1,952,900,000 +  £1,683,200,000 =  £3,636,100,000  £2,026,500,000 +  £1,834,800,000 =  £3,861,300,000 Net Assets  £3,636,100,000  £1,661,600,000 =  £1,974,500,000  £3,861,300,000  £1,688,400,000 =  £2,172,900,000 Source: FAME, 2014 This data shows a drop in fixed assets of about  £73 million and also a drop of about  £150 million current assets from 2012 to 2013, which shows that fewer assets were allocated in both sectors, so it is possible that the firm did not perform as well in 2013 as 2012. The net assets also show a drop over the time period. This is in contrast to Laing O’Rourke, who actually increased its overall assets. This does not mean though that Carillion have less assets than Laing O’Rourke, on the contrary, Carillion, even though the firm did not increase its assets over the year, do however still have about 6 times the amount of Laing O’Rourke. Gross profit can be found by deducting the turnover from the cost of sales. Profit margin ratio can be found by dividing the net profit before tax by the turnover and multiplying the answer by 100. Return on capital employed can be found by dividing the profit before tax by the capital employed and multiplying the answer by 100, as is shown in the table (3) below. Table 3. Profit and loss account Laing O’Rourke 2013 2012 Turnover  £1,640,100,000  £1,622,400,000 Cost of sales  £1,473,000,000  £1,448,700,000 Gross Profit  £1,640,100,000  £1,473,000,000 =  £167,100,000  £1,622,400,000  £1,448,700,000 =  £173,700,000 Net profit before tax  £21,500,000  £27,400,000 Profit Margin 1.31 1.69 Return on capital employed 6.73 8.96 Source: FAME, 2014 Table 4. Profit and loss account Carillion 2013 2012 Turnover  £3,332,600,000  £3,666,200,000 Cost of sales  £2,984,600,000  £3,279,400,000 Gross Profit  £3,332,600,000  £2,984,600,000 =  £348,000,000  £3,666,200,000  £3,279,400,000 =  £386,800,000 Net profit before tax  £110,600,000  £179,500,000 Profit Margin 3.32 4.90 Return on capital employed 5.60 8.26 Source: FAME, 2014 These figures clearly show us that in both firms the gross profit figures have fallen. Also the profit margin and return on capital gained has fallen in both cases. Both firms did however make a profit over both years and the figures show that Carillion’s profit margins and return on capital gained are significantly higher than those of Laing O’Rourke. Current ratio can be found by dividing the current assets by the current liabilities. Acid test ratio can be found by subtracting stock from the current assets and dividing the answer by the current liabilities. Also the efficiency ratio can be found by dividing turnover by the current assets. Table 5. Solvency efficiency – Laing O’Rourke 2013 2012 Current Assets  £929,700,000  £970,700,000 Current liabilities  £865,400,000  £914,400,000 Current ratio 1.07 1.06 Acid test ratio 0.92 0.87 Efficiency ratio 1.76 1.97 Source: FAME, 2014 Table 6. Solvency efficiency Carillion 2013 2012 Current Assets  £1,683,200,000  £1,834,800,000 Current liabilities  £3,636,100,000  £3,861,300,000 Current ratio 1.01 1.09 Acid test ratio 0.98 1.05 Efficiency ratio 1.98 2.00 Source: FAME, 2014 These figures show that both Laing O’Rourke and Carillion’s current ratio and acid test ratios are hovering around the 1:1 mark, but both firms display a reasonably high efficiency ratio. Laing O’Rourke are at the forefront of the construction industry with new ideas and methods with regards to reducing their impact on the environment. Their current methods include cutting carbon, eliminating waste, sourcing responsibly, and implementing a stringent environment policy that should see their impact on the environment be reduced significantly. Their greatest priority though is to eliminate all accidents through their ‘Mission Zero’ policy. This policy aims to eliminate all accidents resulting in the loss of one or more shifts by 2015 and to eliminate all accidents of any severity by 2020 (Laing O’Rourke, 2014). These efforts should go a long way to improving their performance along with eliminating the bad practices often associated with the industry. To provide success in the future the firm could aim to eliminate waste from their productions entirely and endeavour to not just become carbon neutral, but to become a ‘carbon negative’ firm that will actually help reverse the effects that the industry has on the environment. Also a continued development and implementation of Building Information Management (BIM) into their projects of all sizes up and down their supply line would further increase their effectiveness and efficiency as a firm (www.bim.construction.com, 2014). References BIM Construction (2014) Building Information Management. Available from: http://www.bim.construction.com/ [Accessed 22 April 2014] Cooke, A.J. (1996)Economics and Construction. Basingstoke: Macmillan. FAME Database Ive, G.J. and Gruneberg, S.L. (2000)The Economics of the Modern Construction Sector. Basingstoke: Macmillan. Laing O’Rourke (2014) Environment. Available from: https://www.laingorourke.com/responsibility/environment.aspx [Accessed 22 April 2014] Laing O’Rourke (2014) Health and Safety. Available from: https://www.laingorourke.com/responsibility/health-and-safety.aspx [Accessed 22 April 2014] Laing O’Rourke (2014) Our History. Available from: https://www.laingorourke.com/who-we-are/our-history.aspx [Accessed 22 April 2014] Laing O’Rourke (2014) Our Sectors. Available from: https://www.laingorourke.com/our-work/our-sectors/mining-and-natural-resources.aspx [Accessed 22 April 2014] Laing O’Rourke (2014) Our Work. Available from: https://www.laingorourke.com/our-work.aspx [Accessed 22 April 2014] Laing O’Rourke (2014) What We Do. Available from: https://www.laingorourke.com/what-we-do.aspx [Accessed 22 April 2014] Myers, D. (2013)Construction Economics: A New Approach[online]. 3rd ed. London: Routledge. [Accessed 22 April 2014]. Parker, R.H. (1999)Understanding Company Financial Statements. 5th ed. London: Penguin. Prior, G. (2014) Laing O’Rourke wins Man City stadium expansion. Available from: http://www.constructionenquirer.com/2014/03/31/laing-orourke-wins-man-city-stadium-expansion/ [Accessed 22 April 2014] Word Count 2002 Business Economics Management for Construction (UBIL6Y-20-1) Page 1 of 9 Competitive Advantage: Virgin Atlantic and Ryanair Competitive Advantage: Virgin Atlantic and Ryanair This report analyses how organisations can be strategically guided towards success. The report uses the strategic frameworks; the cultural web, the VRIO framework, the value chain and the the three levels of culture to identify how organisations achieve competitive advantage. Virgin Atlantic and Ryanairs strategies are then subject to scrutiny under these frameworks to identify, in reality, how this is achieved. Competitive Advantage and Distinctive Resources; The purpose of strategy is competitive advantage. Competitive advantage emerges when an organisation enforces a strategy that creates value that is not being achieved by its competitors (Henry, 2008). The advantage becomes sustainable when competitors cannot mirror the value creation of the strategy. A distinctive resource of an organisation can be defined as a resource that cannot be imitated by other organisations (Henry 2008). Strategic Planning; Vision, Values Mission A distinct characteristic of a successful organisation is clarity over what is to be achieved. A clear purpose can enthuse employees, managers and senior managers due to the similar values they may share (Scott Jaff, 1993). A vision is the desired state the organisation aspires to accomplish, values are the core principles of an organisation and the mission gives reason to why an organisation exists (Kaplan et al, 2008). They need to be clear and concise and easily understood by all levels of the firm. Carpenter and Porras (1996) emphasised why clarity of vision and mission hold importance they suggested employees who have a better understanding of the mission and vision are able to have a greater awareness of the organisations strategy and how it is implemented. Secondly an explanation is given to staff of how strategy helps achieve the vision and mission of the organisation. Finally they offer guidance to strategy development as they guide the strategy which guides the organisation. Values create the foundations of an organisation; what the company promotes within their working culture can greatly influence decisions on every level thus a companys strategy for the future will be formed around these core concepts and beliefs. They allow the formation of the organisations purpose; the fundamental reason for existence. Case Example: Ryanair Virgin Atlantic Virgin Atlantic and Ryanair are successful airline companies who achieve competitive advantage in different ways. Ryanair is a concentrated low cost airline who offers a no frills service to customers. The strategy of Ryanair is to be a cost leader. The purpose of Ryanair is therefore to provide a cheap, no frills flight service that is profitable. Vision, Value and mission of Ryanair Vision To offer low fares that generate increased passenger traffic while maintaining a continuous focus on cost-containment and operating efficiencies. Values Cost efficient = low fares low costs. Mission To firmly establish itself as Europes leading low-fares scheduled passenger airline through continued improvements and expanded offerings of its low-fares service. Source: http://www.ryanair.com/doc/investor/Strategy.pdf (2013). Ryanair measures its success through profit. Ryanair recorded a jump in profits towards the end of 2012 which indicates that Ryanair is achieving its purpose (http://www.bbc.co.uk/news/business-20202579). Virgin Atlantic is a leisure airline who is able to diversify into unusual leisure routes and serve different demographic locations to Ryanair. The overall purpose of Virgin Atlantic is therefore to grow a profitable airline that focusses on business and leisure markets and the quality of service offered whilst empowering staff. Vision, Value and Mission of Virgin Atlantic Vision The success of our three year strategy requires us to build on these foundations by focussing on the business and leisure markets and driving efficiency and effectiveness. Values Caring, honest, value, fun, innovation. Mission To grow a profitable airline where people love to fly and people love to work. Source: Virgin Atlantic (2013) Virgin Atlantic measures it success through feedback from both staff and customers through effective feedback systems including 360 degree feedback. The feedback received is often positive and shows Virgin Atlantic is achieving its purpose of providing an airline where people love to fly and staff love to work (Virgin Atlantic, 2013). The above examples demonstrate how vision, values and mission statement underlie the purpose of an organisation and how combining the three together form the foundation of strategy. Ryanair The first organisation to be looked at is Ryanair and how it achieves its cost leader status by looking at its culture in terms of the three levels of culture framework and by applying the value chain to analyse how they integrate the flow of activities to achieve competitive advantage Culture and its connection to strategy Schein (1988) defined organisational culture as a pattern of basic assumptions a given group has created by learning to handle problems of internal integration and external adaptation. Culture is created through the actions of upper level management in relation to what they take precedence to, what they focus on and what behaviours they punish or reward. Hall (1993) suggested culture can be viewed as an intangible resource that can be classified as an asset or competency contributing to an organisations sustainable competitive advantage as culture can hinder a strategy or make a strategy excel. Scheins (1988): three levels of culture Hatch (1993) described the model as a conceptual framework for intervening with and analysing internal organisational culture. Schein (1988) described culture as three levels categorised into: Artifacts Espoused Values Basic Underlying Assumptions. They show how deeply values and beliefs are embedded into an organisation. The model shows the degree to which culture is visible to an organisation and brings about an understanding of the way business process are carried out and what can be done to assist change in an organisation. It is used to diagnose cultural characteristics of an organisation which can then be used to develop or maintain Strategy and the strategic advantage that ensues. The table below summarises each level of culture; Three Levels of Culture Artifacts The most observable level of culture and can include business process, aesthetics of the organisation or organisational structures for example. All are visible indicators of culture but are difficult to interpret. Espoused Values They underlie behaviour and can, to some extent, determine behaviour. They are not directly observable and can include strategies, goals objectives or philosophies for example. Basic Underlying assumptions These assumptions are unconscious and often stem from values until they are taken for granted and transfer to the unconscious. Source: Williams (2012). Ryanair; Three levels of Culture The culture of Ryanair is cost efficiency which is reflected in their values, vision and mission where they create their main competitive advantage of being a low cost, frill free airline. Using the framework a diagnosis can be made of the culture of Ryanair and how this creates competitive advantage. Artifacts No complementary services are offered at Ryanair; this reflects cost efficient culture as instead they sell secondary services on flight. Head office staff supply own pens and are not allowed to charge their phones at work in the office, reflective of low cost culture. Employees pay for their own training and uniforms. Ryanair use subsidiaries to make fares cheaper, they are obtained from using local airports so the savings can be passed onto customers. Espoused Values The policies enforced by Ryanairs senior management, e.g. the policy of having to buy own uniform/ stationary equipment, reflects cost efficient nature. Basic Underlying assumptions Embedded guidelines in Ryanair; staff employees deliver a cost efficient service to passengers and they know that they are getting a frills free flight where the expectation of other airlines is to receive complimentary services. Source: Ryanair (2013). The three levels of culture demonstrate how the strategy of cost leadership is built into the culture of Ryanair culture so it becomes an unconscious process from staff and an expectation of customers. The Value Chain The value chain was first characterised by Porter (1985) and is a chain of activities that group together the main value adding activities of an organisation and can be used as a strategic planning tool. Porter (2007) described an organisation as a compilation of individually distinct, interrelated, economic activities which include both primary and secondary activities. The value chain serves as a guide for identifying the key activities within an organisation which make up the value chain that have the potential to create a sustainable competitive advantage. The competitive advantage emerges from the ability of the organisation to perform identified activities in the value chain in a superior way to competitors. Source: Williams (2013). The value chain is divided into primary activities and secondary activities which need to linked together strategically across the organisation so resources can be optimised and coordinated in a way to sustain competitive advantage. Primary activities are activities classified as products or marketing related activities. Support activities assist the primary activities and include infrastructure, human resource management, procurement and technological development. Value Chain of Ryanair The Value chain of Ryanair is a demonstration of how they integrate both primary and support activities together to create competitive advantage; Support Activities which add value to Ryanair; Support Activity:  Infrastructure Description:  Ryanairs Head Offices are minimal Support Activity:  Human resource Management Description:  Management control, limited training, Low number of staff Support Activity:  Technology development Description:  Internet booking system, Low tech marketing, Internet sales, Integration of systems Support Activity:  Procurement Description:  Outsourcing, low costs alliances The support activities defined show how they can accommodate the primary activities in a way that is cost effective. For example, Ryanairs point of sale is internet based, cutting out the middle person so flight bookings go directly to Ryanair themselves. Primary Activities which add value; Primary Activity:  Inbound logistics Description:  Quality training, Low cost suppliers, Airport agreements Primary Activity:  Operations Description:  No added frills (low cost.) Primary Activity:  Outbound logistics Description:  Fast turnaround times of aircraft, reliable service Primary Activity:  Marketing Sales Description:  Low cost promotions, Free publicity, Internet sales, controversial Primary Activity:  Services Description:  Limited resources and very basic Throughout the value chain, each activity is based around cost efficiency. Money is saved through; Providing a basic service to customers Using the internet as a point of sale which incurs lower costs as less human capital is needed Instilling a cost efficient mind set in staff through managing staff in a cost efficient manner by lowering overheads on training, uniform and fancy offices Ensuring there technology and logistics are built around time efficiency ensuring maximum usage of craft and ensuring services they offer are reliable. Source; Ryanair (2013). Virgin Atlantic Virgin Atlantic has a reputation of quality, whether it is quality in terms of service, treatment of staff or the design of the actual aircraft. The cultural web will be used to identify how culture contributes to competitive advantage of Virgin Atlantic and how its resources are distinctive to those of its competitors. Cultural Web Strategy Corporate culture and reputation are significant, intangible resources of an organisation that can create sustainable competitive advantage. The cultural web is a diagnostic tool that looks at the internal environment of an organisation aligning strategy with culture Johnson (2000). Seel (2000) describes the cultural web as six interrelated elements centred round the paradigm (the organisations core belief) which constitutes as the work environment. The paradigm is structured on collective experiences and informs what people in the organisation do and has influence over how change should be responded to. Stories, symbols, power structures, organisational structures, control system and ritual routines are the six elements that make up the web and are the focus of strategic change. Each of the elements must be examined in order to gain understanding of an organisations culture (Johnson, 1992). Organisational culture needs to inspire innovation meaning that although culture needs to be embedded in an organisation it needs to also be flexible in order to achieve sustainable competitive advantage. Cultural web of Virgin Atlantic The paradigm of Virgin Atlantic is reflected in their mission statement; to grow a profitable airline where people love to work and people love to fly. The core belief of Virgin is delivering quality experience. Stories; Most stories involve Richard Branson (the founder of the virgin brand) and often relate to his personality or management style and portray him as an anti-corporate, innovative hero. Rituals; Virgin Atlantics headquarters are spacious, have a relaxed atmosphere and when staff reach training milestones they and their families are invited to an event which is often attended by Branson himself. Power Structures; Most decisions and visions are controlled by a driven, close knit group of senior executives Organisational structures; Small, focussed teams that work to maintain a small company mentality inside a big company. Control; Financial and performance results are displayed for everyone to see encouraging and empowering staff to take responsibility for their performance. Symbols; Branding is smart and slick and conveys the good reputation that the brand Virgin has. Source: Virgin Atlantic (2013) The cultural web shows how the six elements interact with each other creating the core belief of quality and innovation. The VRIO framework Barney (1997) described strategic resources as; valuable, rare, inimitable and organisable. The VRIO framework is a tool an organisation can use to examine its internal environment and views organisations as bundles of resources. If these resources are correctly used then an organisation can gain competitive advantage over competitors depending on the four characteristics identified by Barney (1997) and determines whether the advantage is temporary or sustainable. Oriordian (2006) described four questions that need to be asked when identifying an organisations resources and capabilities; How valuable is the resource? How rare is the resource? Can the resource be imitated? Is the resource organised in an efficient manner? If the answer is yes to the above questions then the resource offers a competitive advantage over competitors. When analysing an organisations resources one of the following answers occur (Barney 1997); If an organisations resource is not valuable then the firm can expect to be at competitive disadvantage If the resource is valuable but not rare competitive parity is reached If the resource is valuable but not rare a competitive advantage is reached but it may only be temporary. If a firms resources are rare, valuable but not costly to imitate then temporary competitive advantage results. If the resources of an organisation are valuable rare and costly then a sustained competitive advantage will result if the resources are organised properly. VRIO framework of Virgin Atlantic Virgin Atlantic has a number of resources that help sustain its competitive advantage over competitors. Its brand and reputation are indisputably its strongest resource whereas its customer service, geographic location (in terms of flight destinations) and human resources are a competitive advantage now, but have the risk of being imitated in the future. The VRIO framework for Virgin Atlantic shows that competitive advantage is gained from there resources that are valuable, rare, inimitable and organised. The brand name Virgin and the ability the name has to raise capital due to Virgins reputation are the resources that ensure sustainable competitive advantage is achieved. Technology, the location of where flights are available to and from and the organisational structure of Virgin are all resources that can create competitive advantage but have the possibility of being imitated by competitors which means the advantage may only be temporary. Conclusion; By exploring the strategies of both Virgin Atlantic and Ryanair it is clear that different strategic routes can be taken to achieve competitive advantage. Both organisations use their resources effectively to achieve their purpose. Competitive advantage is about creating and sustaining superior performance (Porter, 1998). Looking to the future Airline companies will be have to face rising fuel costs and an increasing demographic of consumers who have less disposable income. This could propose challenges to both organisations. Ryanair focus on cost efficiency, however, if fuel prices were to rise substantially they would have to consider ways in which they can continue to deliver there no frills flight service at competitively low price. With regards to Virgin Atlantic they would have to cater to the consumer with less disposable income by considering how they could improve the efficiency of its processes and activities to appeal to this audience. There is no right way of forming a st rategy as not one applies to every organisation. The most effective strategies are those that meet the needs of the organisation at hand.