Strategic Development at

Virgin 2013

Case Study

Content

Overview.

Virgin’s origin and history.

Richard Branson.

Virgin Growth.

Corporate Rationale .

Corporate Parenting.

Challenges facing the group

Corporate future strategy.

Branson’s departure.

Overview

The Virgin Group is a highly diversified organization

Founded by Richard Branson

Leading entrepreneurial brands with over 200 companies.

Operates globally across 29 countries.

Complex organizational structure.

High emphasis on innovation.

Strong Brand image ‘Consumer’s Champion’.

Richard Branson

Branson is known for his charismatic, risk taking, fun, and daring persona that enabled him to build a business empire projecting his own personal philosophy.

Richard Branson flamboyant style and flair for publicity generate interest and awareness which has enabled Virgin to create a brand image.

“A business has

to be involving, it

has to be fun and it has to

exercise your creative

instinct ”.

Personal Philosophy

Virgin’s History

Branson started by selling mail-order records, by which he gained access to high street retailers, enabling him to open an Oxford Street Store in 1970

After wards the business expanded into record labelling as Virgin Records.

In 1984 Virgin Atlantic, a low-cost transatlantic airline. The first foot in conglomerate diversification.

Virgin’s History

In 1986 it was floated on the stock exchange. However,

Branson’s personality wasn’t compatible with the

accountability required of a chairman of a public

corporation.

In 1988 he bought out the external shareholders and

retuned the group to private ownership.

Virgin Growth

Music

In 1987 the group expanded their business by establishing

Virgin Records America, seeking a new, larger market.

Travel:

Deregulation of the railways provided Virgin with the

opportunity to form Virgin Rail.

Deregulation in Australia and Nigeria allowed Virgin

to set up other low-cost Airlines.

Virgin Growth

Media & Mobile

The beginning of cellular communications and deregulation of the telecommunications sector in the UK led to the setting up of Virgin Mobile.

Lifestyle:

Branson was drawn to markets were he perceived undue conservatism, a lack of innovation and under-served customers in industries related to lifestyle including , health clubs (Virgin Active), drinks (Virgin Drinks), and bridal enquiries (Virgin Bride).

Money

In 2007 Virgin acquisitioned Northern Rock, a medium-

sized UK mortgage provider, to enter financial sector.

Virgin Growth

The Breadth of the group activities

Strategic Development Directions

Market Penetration Product Development

Market Development Diversification

Existing Product New Product

Exis

ting M

arket

New

Mar

ket

Corporate Rationale

It is the way in which a corporate parent envisages the

way that it can add value to its strategic business units.

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.

Corporate Rationale

Ring-Fenced Businesses :

The operating companies of virgin group are all separate entities, financed

on a stand alone basis.

Flat Management Structure:

No direct lines of reporting or control in the group with minimal

management layers and no bureaucracy, significant autonomy level.

Corporate Rationale

Diversification into as many markets feasible in order to extent the

virgin brand.

The sacrifice of short term profits to earn long term growth.

Acquiring innovative partners, pioneers in their fields, matching

Robinson’s persona.

Corporate Rationale

Offering low cost, better quality product to a complacent market in its

growth phase.

Involvement in new projects that meet 4 out of 5 criteria:

Innovative

Good Quality

Challenge Authority

Offer value for money

Must be in a growing market

Corporate Parent-Adding Values

A corporate parent is responsible for allocating capabilities

and coordinates between business units in order to achieve

synergy and consequently economies of scope.

Corporate Parent-Adding Values

Virgin’s Adding Values

1. Understanding institutionalized markets.

The ability to identify complacent markets in its growth phase,

monopolized by few rivals, where there is a lack of innovation and

an underserved customer. So they shake up the market by offering

more to the customer for less cost.

2. Virgin brand name:

Considered the most important asset in the group, representing :

Value for money.

Fun.

Good Quality.

Brilliant Customer service.

Innovation.

Anti Establishment.

Corporate Parent-Adding Values

Corporate Parent-Adding Values

3. Extensive network of contracts and partners:

Virgin excels in combining skills, knowledge, and expertise to build

exciting and successful companies.

4. Public relations and Marketing Skills:

Richard Branson adopts a hands-off policy unless it comes to marketing

and publicity he takes a more involved and highly active role.

Challenges

Both virgin media & virgin Rail have had many customer

complaints and in the summer of 2012 virgin rail seemed to have

lost its franchise on the west coast railway line. Critics have

suggested That Rail is weakness in virgin's portfolio.

There is a rising concern regarding the extent of the group

diversification, and whether its own image became too diluted.

Challenges

The departure of Richard Branson is the big elephant in

the room. Many concerns are rising regarding the future

of the group and whether it’s capable to stand on its own

without Branson’s guidance.

Future Corporate Strategy

The group should consider changing its policy to accommodate both

independent and joint ventures to rely upon short term profit on few

of its businesses.

Release the ring fenced policy:

So that important revenue making companies can be saved and

supported during low times.

Virgin should save their brand image from further dilution, by

becoming less diversified.

Will the Virgin Group survive Branson’s departure?

The concern rising from Branson’s departure is mainly due to the following:

Brand appeal and public image are directly linked to Branson himself.

The lack of a formal organizational structure.

The group’s financial situation.

Succession planning is essential to ensure that the organization will have the

ability to stand on its own once Branson departs.

Will the Virgin Group survive Branson’s departure?

Organizational restructuring:

It’s important for the group survival to be restructured to a formal structure

with centralized decision making body, such that any other top opinion former

coming after him can easily fit in.

Virgin group should also have a corporate headquarters, where the group’s

policy and financial decisions are centralized.

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