Virgin group - case study

1. What are the key strategic questions that the Virgin Group asks when starting a new business venture? Virgin Group started their new businesses with the keyword: "Enthusiasm". The main question they asked themselves was "What would be the real value that Virgin can add to the customers". So they always (at least according to the case) started to walk ahead for creating unique and valuable position which will meet the needs of the customers. The company tried to look at from customers' side and tried to see the basic needs of the customers.

They haven't tried to touch all the customers; however they tried to reveal the competitive advantage of reaching to some clusters. According to Michael Porter's "What is Strategy" article we can classify Virgin Group's positioning as access-based positioning. Virgin Group asked several fundamental questions to themselves in order to add value to specific business sectors. Some examples empowering those arguments are:

  • Is this an opportunity for restructuring a market and creating competitive advantage?
  • Is the customer confused or badly served?

Positioning in different areas is not always easy (I can say it is too difficult). Virgin Group was aware of the difficulties so they had to think about the Virgin brand name. They have never entered in a business before doing solid researches and analysis. They have reviewed the industry and tried to look from customers' eyes. They were aware of the trade-offs they had to think before entering a new business venture and they have never underestimated the risks behind new entrance. So they always asked the basic questions of:

  • Is this an opportunity for building the Virgin brand?
  • Will it interact with our other businesses?
  • Is there an appropriate trade-off between risk and reward?

So we can summarize the key question before entering a new business as: "Can we create a competitive advantage that will add value (and fun) to customers and our brand name?"

2. How has the Virgin Group established a competitive advantage? Virgin Group has established a competitive advantage among its competitors by serving good value and service to the customers in different ways. They haven't followed the competitors' business or they haven't imitated their ways of doing it.

The basic and the core competence of all Virgin Group's business ventures are to do things just a little bit differently from the rest. And also they always tried to add value by adding a little fun to the business. By differentiating in strategy itself the fit of the activities and the ways of doing business have also differentiated from the rivals. So they have settled their business to an untouchable position. (At least it is difficult to imitate Virgin's strategy)

3. How would you characterize the corporate strategy of Branson's Virgin Group? The answer to that question will not be so different from the ones above. However to better understanding we can characterize the corporate strategy of Virgin Group as "Making difference and creating uniqueness" in any kind of customers' service. They are not stuck to any business field so that makes them flexible of thinking and creating new ideas for their customers and the whole consumers around the world who need (or will need) Virgin's service.

Virgin Group aims to create a competitive challenge in their customers' eyes by creating fun, adding value for their money and providing quality. To do that they are following a direction of finding / inventing of new business ventures to add value and fun to customers. Their business is not only to create value to customers by finding / inventing new ways of doing it but also to go ahead for re-inventing / re-designing the businesses for specific needs of customer segments.

4. What are the main advantages and disadvantages associated with Virgin's solicitation of business proposals from the public to help grow the business? The ultimate reason of Virgin Group's for existence is to create uniqueness and excellently serving customers in any field. So Virgin Group is not stuck to any specific field of business. (except production, they only exist for services) But it is not easy to know all the cultural aspects, the needs of customers on different geographical areas etc. So Virgin's solicitation of business proposal from public all around the world may help them to find out new needs and so new business ventures globally.

The ideas of public may be the reflection of what customers really need and how they will be satisfied. However too many proposals from different places of the world may lead to getting far away from the main focus and think about them. So that they say, they weren't accepting the proposals that are not seriously handled and analyzed. Also too many perfect proposals may lead to failure because Virgin Group may lose the sense of fun and adding value when it follows all the proposals.

They should check all the proposals with their ultimate strategy. (I'm sure they are doing that) On the other hand, assume that a proposal from a creator is too good to innovate about it. Who can guarantee the success? Virgin Group should always think above the frames that the proposal provided.

The proposal itself can see the problem in a correct way but can ask the wrong questions and can solve the problem wrongly. The biggest disadvantage of getting proposals may be framing the problems according to the proposals. Virgin Group should deploy a different and new group to assess the problem and the environment to see the ice below the sea.

5. Examine the range of businesses that fall under the Virgin Group's corporate umbrella. Does investment in these different businesses make sense from a business strategy perspective? Why or why not? Under Virgin Group's corporate umbrella there are more than 200 companies in different business fields clustering under travel, entertainment and lifestyle sectors.

The group has entered businesses varying from balloon flights to drinks and beverages. It is not easy to hold such a structure and sustain the success in all fields. If one of the companies fails to serve to customer, the whole brand name can suffer from the consequences. So normally it can be seen as a risky strategy to get into too many fields. The conglomerations are suffering from these kinds of consequences. They are getting far away from their core business day by day.

However, if we think of Virgin Group's ultimate reason for existing and their strategic way of doing business we can think that investing in different businesses makes sense. Virgin Group is not established to focus on only one sector and create competitive advantage on that sector. It rather established to serve customers in any field in different ways. That is their strategic positioning and their mission is to create value for customer. They do not indicate that they are the best in one field.

They indicate they exist for serving customers, adding value for money and providing quality. For example Coca Cola Company exists for the brand name Coca Cola. Their ultimate reason for existence is to increase the awareness and loyalty for Coca Cola brand. If they notice that the other brands of the company is known more than Coca Cola they can dismiss it.

This situation does not hold for Virgin. Their brand is for creating value and fun to customers. So to my mind, it is not unusual to live in such lots of different fields. If Virgin has chance to serve customer in all known business fields (of course in different ways), I'm sure they won't be afraid to get in to the fields. Their basic trade-off when entering a new business is whether they are creating value and following Virgin's mission to exist while keeping other services alive.

6. Which business line do you think is more likely to invest in Turkey? Why? I think the most appropriate business line to invest in Turkey is the business like Virgin Megastores have. Virgin Megastores deliver 180,000 CDs, DVDs, Games and Videos to customers in Europe. (not in all countries) Such a business line does not exist in Turkey and may add value to customers who are looking for easy access to the musical CD's, movie DVDs and video games. Actually there is not a company specified for delivering only CDs, DVDs, Games and Videos and promising to deliver them directly to the customers' door in Turkey. There are some companies delivering these products.

However their main purpose is not only to deliver these products. Some of them are online shopping companies which deliver almost all kind of products varying from books to health care products. Some of them are only specialized to sell books. Some of them only sell technological products. There are some retailers selling CDs, DVDs and video games but they do not position themselves for delivering the products to customers' doors. (Megavizyon / D&R etc.) So establishing a similar business like Virgin Megastores can add customers a differentiated value.

For the Turkish market, if we position ourselves only for selling CDs, DVDs, Videos and Games and add value to customers by serving them in the best way we can see the return of investment as quickly as possible. Our competitive advantages can be:

  1. Providing almost all kind of music CDs and movie DVDs to customers (if the products are not in our warehouse we can guarantee to find it in a specified time from anywhere in the world)
  2. Delivering the products to their home in the quickest way
  3. Ease of access and use in anywhere (by internet or gsm etc.)

7. Do a SWOT analysis for the line of business you have chosen considering Turkish market conditions. We are establishing an Online CD, DVD and Video Shopping Center which will have some branches in different locations of Turkey. (5-6 in Istanbul, 3-4 in Ankara and Ýzmir and 1 in other important cities) Of course we have to evaluate ourselves and the market to decide on whether it is worthy to enter the market or not. Let's see it:

Strengths:

  • Focusing on specific products (only CDs, DVDs and Videos)
  • Promise of delivering all kind of music bands and movie DVDs/videos to home
  • Ease of access to the internet site and ease of use for shopping (not too complicated steps for online shopping)
  • Delivering fun for customers

Weaknesses:

  • Lack of brand awareness
  • High investment costs for establishing branches in the cities

Opportunities:

  • The increasing demand on DVDs and CDs with the increase in media coverage
  • Difficulties for finding needed music band and movie DVDs from Internet (in Turkish sites)

Threats:

  • Possibilities of imitations by competitors
  • The Turkish market's negative reaction to shopping via internet
  • The quality of distribution channels (may not be the same as ourselves and can effect our image)

8. How dependent is the success of Virgin on Richard Branson? If something happened to him, would the company be able to survive? It is impossible to say that the success of Virgin Group is independent of Richard Branson's entrepreneurship. He started with a magazine and took Virgin Group to an asset with 200 companies. He gave the innovative spirit to the group, and the people working with him.

He started to innovate in different businesses in 1970s and from 1970s to nowadays he made the Virgin brand the most popular brand in UK and Australia. (100% known) Actually the answer to the question "If something happened to him, would the company be able to survive?" is dependent on the time and situations. It would be really difficult to survive if unluckiness found him in the beginning of 1970s. People around him can easily change the strategy and forget the reason of existence (providing customer difference and fun). People can focus on Operational Excellence and forget to innovate in different sectors.

That does not mean that Virgin brand could not survive but it is a possibility that the brand would not be so popular now. However I believe the leadership side of Richard Branson has taught people a lot and the executive people around him has learned so much from him. So in case of any bad luck after 1980s or 1990s I don't believe that the Virgin Brand would fail to survive.

It would survive and the probability of being such successful would be more than 50 %. But as everything is, companies and the strategies are dependent on people. If the founder is dead the way of doing business would surely change. The important question should be HOW MUCH. I believe the enthusiasm and the passion for serving customers has become the corporate culture and won't change from now.