VIRGIN Group

Group 8:09IB-046 Ravikanth Vazrapu

09IB-047 Rohan Agrawal

09IB-048 Rohit Chadda

09IB-049 Saahil Juneja

09IB-050 Sahil Bansal

09IB-052 Shalabh Gupta

AgendaIntroductionOwning PatternGroup StructureManagement SutraGrowth rationaleCorporate ResultsCorporate RationaleRelationship of strategic nature between

businessesVirgin Group as a Corporate ParentThreats and their Solutions

IntroductionOne of UK’s Largest Private Companies, annual turnover

5 billion Euros

Created more than 300 branded companies worldwide

Has 50,000 employees, 30 countries

Brand Revenues > 18 billion USD

96% UK consumers are aware of Virgin brand

95% are aware of Sir Richard Branson as founder

Closest associations are “fun”, “innovative”, “daring”,

“successful”

The Virgin Group

Virgin Travel

Virgin Atlantic

Virgin Holidays

Virgin Aviation

Virgin Balloon

Virgin Rail

Virgin Rail

Virgin Cinemas

Virgin Cinemas

Virgin Media

Virgin Publishin

g

Virgin Group

Virgin Direct

Virgin Net

Virgin Money

Virgin Mobile

Telecoms

Virgin Music

Virgin Records

Virgin Radio

EMI Virgin Music

Virgin Digital Studios

Virgin Trading

Virgin Megastor

es

Virgin Enterpris

es

Virgin Clubs

Virgin Cosmetic

s

Owning pattern1970 – founded as mail order company & grew in

music publishing & retailing

1986 – floated on stock exchange with turnover of 359

million Euros

Compliance with rules, short-term profit deadlines

pushed back into Private Ownership

Grew fast & profitable as an international company

No financial results consolidated

No “group” as such

Group’s StructureVirgin Group is “a branded venture capital

house”

Each business is “ring fenced”

Tied only by a degree of shared ownership

& importantly shared values

Equity vs. Ability to Expand

Long term growth vs. Short term profits

Group’s StructureOpaque structure due to Private Ownership of Group

Almost wholly comprised of private companies

“Keiretsu” organization

“Loosely linked autonomous units run by self-

managed teams using common brand name”

Philosophy - After critical mass, spin a new business

out of an existing one

Dec 2003 – Public offering of Virgin Blue

Management “Sutra” “Sutra” is to

Decentralised decision making

Low cost at Head-office

Autonomous business-level decision making

Responsible for own development

Sir Branson

Involves only in marketing & promotion

Personal style of Management

Seeking ideas from employees

Stock options, bonuses, profit sharing & promotion wherever possible

Importantly – employees are accountable for performance

Growth RationaleVirgin to represent “being a virgin in every business”

Fierce External Diversification strategy

“Brand is single most important asset of the company &

so make it a global one”

Joint Venture – Virgin provided Brand, Partner provides

Capital

Ex: Virgin Mobile built by forming partnerships with

existing operators

Growth RationaleResearch w.r.t. offering something truly different

Extend Brand at a low cost into selected areas to

shake up a relatively static market

Be the customers’ champion

Start Greenfield projects in “institutionalised”

markets

By 2008, Group has started more than 300 new

companies & work on Risk-Reward model

Corporate ResultsMixed Results of failure & sheer success

Virgin Atlantic vs. British Airways

Virgin Blue – low cost Australian success

Brussels based Virgin Express lost money

Virgin Clothing was shut in 2000

In 2003, Virgin Cola & Virgin Vodka merged into

Virgin Drinks

Shaky future of Virgin Rail

Corporate ResultsSold Virgin Music

Sold 49% stake in Virgin Atlantic to

Singapore Airlines

In 2001, sold Virgin Sun to First Choice

(their rival in holiday business)

“Start companies from scratch, make it a

success & sell it for a profit”

Reach across boundariesInto Telecom in Europe

Into Financial Services in USA

JV with Sprint in USA

Public offering of Virgin Blue (Australia)

QuestionsWhat is the Corporate Rationale of Virgin

Group?

Corporate RationaleVirgin’s corporate rationale is merely a

projection of Sir Richard Branson’s own personal philosophy.

The management aims to being known as the “customers’ champion”.

As for corporate bureaucracy its significance in the Virgin Group is very minimal.

Sir Richard Branson adopted a ‘hands-off’ policy with his managers and by doing so, encouraged their own initiatives.

Corporate RationaleThe management recruited carefully selected

individuals to be innovative people, pioneers in their field, and to have the competitive streak in their personalities.

The key emphasis was in innovation and differentiation

The Virgin Group’s rationale is to diversify into as many markets feasible, and extend the Virgin brand name further at a low cost; where stature could be relied upon to reduce barriers to entry into static markets.The key point is that the market to be entered must

be still in its growing phase.

QuestionsAre there any relationships of strategic

nature between businesses within Virgin portfolio?

Strategic RelationshipAll the business in the Virgin Group is

strategically targeted towards a “five pillar” empire system.“the heart of Virgin’s core strategy to

develop the five pillars of the business empire: travel, leisure, mobile phones, entertainment retailing and personal finance”.

Brand was the single most important asset of the companyBy giving a venture the prefix of Virgin; is to

send out a message to the consumer to say out loud this new business is a “virgin” in its market place, “fun”, “innovative”, “daring”.

QuestionsDoes Virgin group, as a parent, add value

to its businesses? If so how?

Virgin group, as a parentThe diverse aspect of the Virgin Group

allows for more consumer and investor confidence.

Understanding of institutionalized MarketsVirgin brand name to overcome barriers to

entryLimiting Risk in joint VenturesManagement are not restrictedFosters Innovation

QuestionsWhat are the main issues facing the Virgin

group and how should they be tackled?

ThreatsSingle greatest asset & threat is the Virgin Brand

A bad sub-brand might affect other sub-brands &

parent brand

Very diverse offerings => High Risk of effect of each

other

Virgin Atlantic vs. Virgin Rail

What “after Branson”?

Each business is “ring fenced” and long term v/s short

term profits

SolutionsEnsure business units perform their

operations in a way that inculcates the fun, trust and quality that is associated with Virgin.

In the longer run, however, Branson will have to put in place a strong succession plan and fill the corporate head office with executives who are able to understand and execute the Virgin Charter.

The Virgin Group should change its policy to accommodate both independent and joint ventures to rely upon short-term profits on a few of its businesses for the sake of raises capital

SolutionsEvery effort should be made to bring in line

the accounting year end date for all businesses in the Virgin Group to be on the same date. This shall aid towards providing a better picture of the health and wealth of the empire.

Release the ‘ring-fenced’ policy so that important revenue making Virgin Atlantic can be bailed out during the low times.

Thank You

“My interest in life comes from setting

myself huge, apparently unachievable

challenges and trying to rise above

them...from the perspective of wanting to

live life to the full, I felt that I had to

attempt it.”