Strategic management - Virgin group

In 1968 a guy named Richard Branson started the Student magazine and that was the starting of his revolutionary business career and from that time Branson did not have to look back ever. Now today Branson has the huge size of his business which is VIRGIN BUSINESS GROUP. This group owns more than 200 companies. “Branson” and “VIRGIN” is now a symbol of a famous brand all over the world.

VIRGIN group holds a pretty number of companies. Most popular VIRGIN companies are VIRGIN Money, VIRGIN America, VIRGIN Australia, VIRGIN Money Giving, VIRGIN Casino, VIRGIN Holidays, VIRGIN Balloon Flights, VIRGIN Cola, VIRGIN Atlantic Airways, VIRGIN Galactic and VIRGIN Mobile. Starting a business from student magazine to airlines, VIRGIN group is now operating in many continents like America, Europe, Australia, and Asia.

VIRGIN’s Competitive advantage

According to the Resource based view point, the resources which are valuable, scarce, difficult to imitate and can’t be substituted by another resources are considered as competitive advantage for the company. From this view point VIRGIN group has a couple of Competitive advantages. Their competitive advantages are shown below according to the VRIN model.

| Resources | Valuable (V) | Rare (R) | Inimitable (I) | Non-Substitutable | | | | | |(N) | | Brand | ( | ( | ( | ( | | Richard Branson | ( | ( | ( | ( | |Legal Complexity | ( | ( | ( | ( | |Organizational Culture | ( | ( | ( | ( |

Core Competencies of VIRGIN

The core competence of VIRGIN group is their Brand “VIRGIN”. The Brand is hard to imitate for its competitors. It has leveraged widely in many products and markets. It has also contributed to the end customer’s experienced benefit. Business tycoon Richard Branson had the high ambition of expanding the business by using the brand “VIRGIN”.

That’s why the business of VIRGIN group didn’t stand still within some specific industries but expanded enormously. Synergies are shaped from hierarchical affairs and the interaction of the corporate head office with individual business units. By leveraging the VIRGIN Brand which has recognized reputation into the consumers’ mind, VIRGIN is able to enter new business areas with a bang and shake up existing orders.

The Growth of VIRGIN

As time passed by VIRGIN grew significantly and penetrated in different markets. VIRGIN’s growth can be mapped according to the “McKinsey’s Three Horizons of Growth” as given below.

VIRGIN GroupHorizon 3

(1970 – 2006) Credit Cards

Entertainment

Horizon 2 Cars & Bikes

Financial Services

Beverages

Travel & Tourism

Horizon 1 Telecom

Records

Videos & Games

Airlines & Cargo

Figure: McKinsey’s Three Horizon of Growth

Branson’s Implemented Strategies

Branson as an entrepreneur has some primary strengths like conceiving and implementing new business ideas. His unconventional business structure and strategies were so unique that it is hard to imitate. VIRGIN group used to acquire different non-related individual companies having low market shares in different high growth industries. They made revenues from those companies and when the industry growth falls, they sell them with high prices. If we figure out this strategy in the BCG ‘Growth-Share Matrix’, we can see that a number of companies were bought and sold in relation to their growth and market share.

| | High Share | Low Share | | | | | | | |(Question Marks?) | |High Growth |(STARS) | | | | |VIRGIN Vision Launch | | | |VIRGIN Music Launch | | | |VIRGIN acquires Mastertronic | | | |VIRGIN Blue Launch | | | | | | |(Cash Cows) | | |Low Growth |VIRGIN Vision sold to MCEG |(DOGS) | | |VIRGIN Music sold to Thorn EMI | | | |VIRGIN Mastertronic sold to SEGA | | | |50% of VIRGIN Blue sold to Patrick Corp. | |

Figure: BCG ‘Growth-Share Matrix’

Key issues

Virgin Group of companies is now facing a loss in its almost every business. And its only profitable business VIRGIN ATLANTIC is running in a marginal profit. There are some key issues which is causing this loss. Those are:

• Irrelevant diversification: Virgin group of companies takes initiatives to open business in a diversified way, but the diversification is not relevant in any way sometimes.

• Less Co-ordination: There is less co-ordination between the companies and there is not any consolidated commercial and financial report record as a whole of the VIRGIN group of companies which leads to a lacking of any break-even point of the group of industry and because of that there is not any specific motivation.

• Complicated organizational structure: VIRGIN group of business has a complicated organizational structure which causes the less or negative synergy.

• Consistency: There is not any consistency and any long term plan with a certain company. It is strictly focused on just acquiring a company and makes it a cash cow which leads to no consistency according to any mission.

• Concentrated profit: VIRGIN is now having their most of the profit from the Virgin Atlantic and the other firms are facing a loss. So, there is only one company to hold the others.

• Competitive strengths: Virgin group has the MR. Branson and a brand name with a good amount of capital. With this only, it is really tough to sustain in this competitive era.

• Strategies should be taken

• Relevant diversification: VIRGIN group should go for the relevant diversification. That will create some kind of positive synergy within the group among the companies. For example they should open or merge business those are related with their present business ventures.

• Consistency: Virgin does not have any consistency in their most of the businesses. That policy should be changed. Because, this is a real competitive world of business and it is tough to make a strong base of making profit. So, Virgin should go for sustain a business rather than selling it in a matured cash producing position.

• Core Competence: Virgin should create some core competence among their business firms, so that if the companies can’t make profit, for the core competence they can give some back up to the cash cow companies.

• Competitive advantages and strengths: Virgin should create some more competitive advantages through product or process innovation and create the brand name as a source of differentiation as it has already come across a long time. As a matured company in the industry they should focus on branding through differentiation and make some more competitive strengths to survive in the competitive market.