The corporate rationale of the Virgin group is to re-ignite static industries, with fresh ideas and developments, thus offering the consumer differentiation. Diversification is an extremely important attribute of Virgins rationale. Their SBU’s improve Virgin’s scope and therefore its existing markets and products. Virgin uses the ideology of ‘the corporate parent’ to add structure and guidance to its various business units, which in turn adds value due to the effective, disciplined approach that the rationale provides.
There are certain strategic relationships between businesses within the Virgin portfolio, these lie in ‘economies of scope’. This term refers to the notion that the Virgin groups have synergy amongst its SBU’s, therefore utilizing free standing tangible and intangible resources in order to fully comprehend and fulfill a particular new environment or market. This adds value to a new market whilst ensuring resources are not wasted. An example within Virgin would be their research into the global oil market and the search for greener fuels for its airlines.
Virgin as a corporate parent adds value to its group via the collective ambition and ideology which is ascertained via the strength of the Virgin brand. One aspect of Virgins Corporate parenting is the ideology of ‘envisioning’. Virgin provides ‘strategic intent’ by laying certain ideologies for its SBU’s to follow. This provides discipline and strong methodologies for the units to adhere too. Another element of ‘value adding’ via Virgins parenthood can be explained using the BCG matrix. The Virgin group’s portfolio shows high market share and strong growth within their markets. These positive denotations enable management to visualize the potential of concurrent markets and ensure growth is fully realized.
’The greatest threat that the Virgin brand may become associated with failure’’ (Johnson et al, 2009). This signifies one of the issues facing the Virgin group. The larger the Virgin portfolio gets, the more issues they will face regarding the density of their diversification and therefore ensuring consumers are not undermined and loyalty is retained. Another issue is that of waning portfolio and growth which is susceptible to ‘slowing down’. Recognition of ‘Stars’ (BCG) turning into ‘Dogs’ is extremely important to ensure the correct visualization is atoned for and that growth is relative to the portfolio’s strength as a whole and not allowed to become complacent, leading to surplus resources and market share.