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Table of ContentsExecutive Summary.......................................................................................................2

Problem Statement .........................................................................................................4

Literature review............................................................................................................8

Conclusion ...................................................................................................................10

References....................................................................................................................11

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Executive Summary

The case focuses primarily on Richard Branson and Virgin, Inc based on three man

aspects: the organizational structure of the company, the style of the leadership and the

management approach towards motivation of employees.

The Virgin Group which was conceived in 1970 as Virgin Records by Sir Richard

Branson, has gone on to grow in business sectors ranging from mobile communications,

to transportation, travel, telecommunication, financial services, leisure, music,

holidays, publishing and retailing. It has expanded beyond the borders of an average

conglomerate into a global business empire of more than 300 companies, employing

more than 50,000 people and doing business in more than 30 countries, and generating

more than 18 billion US dollars in revenues annually. The business has witnessed

continual growth since it was started. The nature of leadership in existence in Virgin

Group draws many features from the personality of Sir Richard Branson.

Figure 1 The Virgin Holdings

The management of Virgin Group does not fall in to any particular model. It has a

unique management structure whose characteristics do not fit those of the existing

models, however it does employ aspects of different concepts which comes together to

form its own distinctive style. The management of Virgin group with a heavy weight is

contingency approach. The decision-making and plans executions are done with close

reference to the problem at hand. This has seen the group attain notable milestones in

streamlining its management. In this management model, the dynamics of business

environments is appreciated. It recognizes the fact that different environments require

different management approaches.

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The Virgins culture is developed with the set of policies, beliefs and attitudes learned

and shared by the majority of the organisations members. Virgins dominant culture

has affected the way in which they have developed its products and its staff. Virgins

dominant culture has led to the brand recognition of the Virgin which leads to make

positive impressions among general public, and allows to set up new businesses in new

markets easier.

Sir Richard Branson is one of those leaders who have been able to take on lifes

challenges and turned them into learning opportunities. He has adopted a technique

which is closely related with Japanese Keratsu system. His companies are connected

with each other very well and supports each other up to certain degree. He gives his

subordinates more freedom to work their tasks. By proving such freedom, managers

would inevitably feel more of a sense of responsibility, ownership and would try their

up most to make a success of it. However organizational goals of Virgin Group cannot

be dissociated with those of Sir Richard Branson. This addresses that the management

style in the organization has some elements of bureaucracy in leadership.

Sir Richard Bransons leadership style falls in the category of transformational. He is

famous for his risk taking ability and habit. He is also interested with people who are

willing to take risks and the best in their tasks. In his ventures, he looks for people who

are outgoing and willing to start new businesses. The most common feature that has led

to achieve great milestones in business is the ability to motivate fellow partners in

pursuit of a new business opening. His focus deviates from routine perspective of

employees where the management expects the workers to perform to deserve

compensation. He believes everyone wants to deal with top person so he provides his

managers to deal with him directly. He has close touch with the day to day activities of

various companies within his group.

Virgin has a diverse approach so they dont have any set of traits for a person to become

employee at Virgins. However they use to select people who are ready to take

responsibility in their own and can work hard. Thus company has created its value in

the business and market and made its brand as symbol of success and trust.

In this case, the study examines the problems arisen among those three key areas of the

organizational behaviour as mentioned earlier and proposes possible solutions with

relevant facts and literature.

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Problem Statement

1. The strong belief of Virgin in Brand Franchising as primary marketing

tool

A brand franchise is an arrangement between the corporate of particular brand and

wholesaler or retailer for the distributor to use that brand exclusively in an area. That

is, the wholesaler or retailer is the only company permitted to sell that brand product

within certain geographical boundary.

There are several benefits of entering into a brand franchise arrangement. If the brand

name is well-known, the retailer will find it is much easier to gain the consumer pool

in the local market. Manufacturers also benefit from it. Brand owner can place the

products in front of prospective customers, without establishing their own local retail

outlets by contracting with wholesalers and retailers.

However for global conglomerate like Virgin group there are certain issues can arise

with brand franchised strategies. Those are

Limited control over the business - Business operations set out and bound by

the rules of locals

Threats by reputation issue - As a franchisee you would rely on the brand of the

business to gain customers. If there is any issue has arisen in one of the

subsidiary of certain brand it will affect other subsidiaries reputation as well

Lack of brand awareness It is difficult to open a business and capture the

market in a new location where the people do not have any idea of the particular

corporate or its products.

Solution

- Corporate should appoint its experts and highly skilled people along with the locals at

top management of the business organization when open a business in a new location

to ensure the control of the franchisee in business activities.

- Corporate can use more familiar and different names rather its own brand to establish

businesses in different locations to avoid the issues regarding the reputation damage

- Corporate should conduct thorough and effective market and risk analysis aligned

with its brand and products in certain location before establish the business venture.

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2. Negative aspects of the Keiratsu system

Keiratsu system the interconnected business relationship and shareholdings that exist

between the subsidiaries of particular corporate group and each company holds some

form of ownership in the other, thereby ensuring a direct effect of performance on each

other. The system is centralized with a bank which lends money to all companies in that

group, in return for equity, a monitoring entity and the right of control.

However the downsides of this system are:

Less control over the access to capital keiretsu company knows they can easily

access capital. This could potentially allow a company to take on too much debt

and lead its business.

Issue of the reputation damage As mentioned earlier in the brand franchising,

if a company of the group faces any failure or setback in business it will impact

other companies as well like chain reaction.

Solution

- The bank which acts a centralized institution of the Keiratsu system should implement

policies and regulations regarding the rights of capital access for each company.

- The corporate can form several keiratsu groups instead of establishing single large

keiratsu group to avoid the complexity and impact of chain reaction as well.

3. Issue of the loosened and people oriented operations

People oriented operations can benefit the employees of each company hold a stake in

the success of the business, with the requirement that each company be self-sufficient.

But there are some consequences can be occurred as a result of people oriented

operations.

Misuse of Influence recruitment of unqualified people and wrong decision

making can be resulted due to the personal influence of managers. This will lead

the company into the wrong direction deviated from achieving the

organizational goals and gradually spoil the reputation of the company.

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Lack of cooperation between managers creates unhealthy competition

between local managers leading to lack of co-operation and coordination. As a

result, interdependent functions may suffer and resolving interdepartmental

conflicts becomes difficult.

Less Control Trust and faith between employees and managers are the key

factors to drive the work force of the organization towards the success The risk

is once-trusted associates may mismanage or even abuse their new found power

and it will difficult to control them or turn them back into right position.

Solution

- Corporate should control the degree of authority delegated to the lower levels of the

organization in order to overcome control and influence issues

- Sufficient financial resources should be provided to ensure the accomplishment of the

tasks under the responsibility of the people oriented operations

4. The transformational leadership of Sir Richard Branson

Sir Richard Branson uses both transactional and transformational leaderships according

to the requirement of the situation. But as a leader and innovator he prefers and chooses

transformational way mostly over the transactional approach of leadership. But there

are some cases where transactional approach seems to work best. For instance, where

the employees are lagging behind from the scheduled completion of a project which

involves precision and high risks, transformational style would fail to address the

significance of the situation.

Solution

Branson can further improve his leadership skills by focusing on the use of transactional

leadership style in managing the employees in his group of companies. The use of

rewards as well as penalties needs to be given for the purpose of regulating the

processes as well as the people in an effective manner.

As a leader he can provide feedback to the employees, discussing about their

limitations. The use of appreciation as well as criticism in the form of constructive

feedback can be used to lead the employees in an effective manner.

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5. Sir Richard Branson: backbone of the Virgin group

Sir Richard Branson, founder of the Virgin group who is considerably the single most

important ingredient to all the success that has been achieved up-to-date. He is one of

the most eminent figures in the business world as he is well known for his risk taking

behaviour. Through the able leadership of its Chairman, Sir Richard Branson, the

management team has come up with a unique formula of managing large scale

businesses like Virgin Group. To a large extend, the success of Virgin Group is directly

attributable to the input of Sir Branson. He has succeeded in opening a new chapter of

management, which deviates from conventional methods. There is a formidable blend

and balance between management and leadership.

But the million dollar question is what will happen to virgin after Sir Richard Branson.

Is there powerful, energetic, charismatic and breakthrough leader after him to run the

Virgin group successfully?

Solution

Sir Branson should consider the significance of leadership after his period to ensure the

sustainability of the Virgin throughout the time. He should select and train the

employees who are in higher positions in his companies and have great potential to

become leaders.

Sir Branson is one the effective leaders in the world as the chairman and founder of the

Virgin group. If he would create the effective and efficient leadership to expand the

Virgin Empire and its reputation as much as he did, then he will become a great leader

ever.

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Literature review

Franchising

A brand franchise is an arrangement between a corporation and a local retailer or

wholesaler to function as the exclusive seller for the corporations products within a

defined sales territory (www.wisegeek.com).

Franchising as a concept is simple: A parent company (the franchisor) develops a

model for a successful business and builds and advertises a brand. An individual (the

franchisee) licenses that brand, products/services, and business model typically with

exclusivity for a specific geographic location.

Franchises work for those who:

Want the security of choosing a brand-name business with proven products.

Want a "turnkey" operation with established business operations and guidelines,

training and support.

Are willing to follow rules. Most franchisors do not allow you to deviate from the

products and services they sell, the suppliers they use, and the way they do business.

Have money to invest up front. You will have both a franchise fee and startup costs.

Are willing to split the profits. You are likely to have monthly royalty and advertising

fees and a variety of other fees and costs.

Are willing to work hard. Just as with any business, running a franchise still takes a

lot of work to succeed.

Are willing to take the risk that the franchisor may not renew their license at some

time in the future (Rhonda Abrams, USA TODAY).

Keiratsu system

The limited competition within the keiretsu may lead to an inefficient company

because a keiretsu company knows they can easily access capital. This could potentially

allow a company to take on too much debt and lead it into taking on overly risky

strategies.

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The economic crisis in Japan in the late 1990s forced Japanese companies to compete

for price and quality by using market-based systems instead of keiretsu relational

arrangements. This occurred due to major horizontal banks' reports of profit losses

(Brian Twomey, Investopedia.com).

People oriented operations / Decentralized system

A possible disadvantage of a decentralized structure is that you must relinquish a bit

of control. You must put your faith in others to continue to carry out your company's

vision and mission. For a business owner who has worked hard to build your enterprise

in your own unique way, the process of "letting go" can be difficult. There's also the

risk that once-trusted associates may mismanage or even abuse their newfound

autonomy and power. Another potential disadvantage of decentralization is that the

organization may become fragmented. Units that once worked well together in your

centralized structure may lose their sense of team spirit and cooperation. Decentralized

units may put their own best interests first instead of those of your company as a whole.

Areas such as productivity and customer service may suffer as a result. Innovative ideas

that once spread quickly throughout the company may now remain within individual

units (Chris Joseph, Demand Media).

A highly decentralized organization can be the battleground for unhealthy competition

between local managers leading to lack of co-operation and coordination. As a result,

interdependent functions may suffer and resolving interdepartmental conflicts is

difficult when authority has been delegated. In addition, there is costly duplication of

work (activities, processes and outcomes) that may impact economy of scale (Preeti

Sunil, buzzle.com).

Transformational leadership

Richard Branson could have used task oriented leadership as well as people oriented

leadership according to the requirement of the situation. On the other hand, in cases

where employees are lagging behind from the scheduled completion of a project, the

people oriented leadership style would fail to address the demand of the situation. In

addition to this, the greater degree of reliance is beneficial for tasks and projects that

carry low risk. But when a project involves high risk, a leader needs to use a blend of

people oriented and task oriented leadership styles to achieve the objectives in an

effective manner. Branson can further improve his leadership skills by focusing on the

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use of transactional leadership style in managing the employees in his group of

companies. The use of rewards as well as penalties needs to be taken into consideration

for the purpose of regulating the processes as well as the people in an effective manner

(Brown, 1998).

Transformational leaders stimulate innovative thinking by encouraging their teams to

take carefully calculated risks. By running workshops and conducting focus groups,

leaders help teams ponder complex ideas. By spurring intellectual curiosity and

creativity, you can foster individual expression and help your team solve problems in

new ways. Without establishing procedures for acknowledging and accepting failure,

however, transformational leadership strategies can cause you to pursue ideas with little

or no merit (Tara Duggan, Demand Media).

Conclusion

There are many things to be learned from leadership and management of Virgin Group

Limited. The company has cut itself a niche in various industries. It has also proven

that all things are possible with dedication and commitment. Virgin group have their

own ways of developing people. It should consider various business strategies rather

than brand franchising approach. It should focus more hidden capabilities of people

who are working in Virgin and those are trying to attain higher professional success

though their hidden skills in order to sustain the success of business. Sir Richard

Branson Today he is recognized as one of the leaders who have faced failures and

were still able to be successful in the corporate world. But he can further improve his

leadership skills by focusing on the use of transactional leadership style in managing

the employees in his group of companies. Also he should concern the leadership after

his time to ensure the continuous growth of his corporate empire throughout the time.

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References

Brian Twomey, Understanding Japanese Keiretsu, Available at:

http://www.investopedia.com/articles/economics/09/japanese-keiretsu.asp

Brown, M. (1998), Richard Branson: The authorized biography, Headline

Book Publishing, UK

Chris Joseph, Advantages & Disadvantages When Companies Decentralize,

Available at: http://smallbusiness.chron.com/advantages-disadvantages-

companies-decentralize-11938.html

Preeti Sunil, Advantages and Disadvantages of Decentralization, Available at:

http://www.buzzle.com/articles/advantages-and-disadvantages-of-

decentralization.html

Rhonda Abrams, Strategies: Is franchising a ripoff or road to success?.

Availabla at:

http://www.usatoday.com/story/money/columnist/abrams/2015/02/20/small-

business-columnist-abrams-franchising/23650217/

Tara Duggan, Negatives of Transformational Leadership, Availabl at:

http://smallbusiness.chron.com/negatives-transformational-leadership-

10533.html