The Virgin Group Case Study

THE VIRGIN GROUP

CASE STUDY

QUESTION 1: What examples does the case give of links between Branson’s

strategy for Virgin and the environment in which it operates?

The Virgin Group Ltd is a group of separately run British companies with the Virgin brand under the leadership of English celebrity business tycoon Sir Richard Branson. The core business areas are travel, entertainment and lifestyle, among others.

Richard Branson’s strategy comes from his deepest inner beliefs;

“in principle there were no product or service boundries

limiting a brand name, provided it was associated with

quality products/services on offer”

The corporate strategy of the Virgin Group is to operate like �a venture capital firm based on the Virgin brand.’ This strategy involves non-related diversification at the individual business unit level. Meanwhile, synergies are created from hierarchical relationships and the interaction of the corporate head office with individual business units. By leveraging on the Virgin Brand which has established prominence in the minds of consumers, Virgin is able to enter new business areas with a bang and shake up existing orders. The unique Virgin culture also allows Virgin to break into new markets and execute its ventures very effectively.

Virgin’s corporate strategy is best described in the Virgin Charter вЂ" the individual businesses are focused and develop as autonomous enterprises under a single unified brand name. This decentralization of organizational structure and decision making allows an entrepreneurial environment for managers to pursue their businesses effectively, while avoiding the bureaucracy associated with large centralised corporations.

At the same time, the individual businesses benefit from the world-wide, inter-industrial reputation of the parent corporation’s Virgin brand and are able utilize this brand recognition in their marketing efforts. This benefit of corporate parenting would not be available to them if they were operating under their own subsidiary brands, and is perhaps the greatest source of synergy within the Virgin Group. In this manner

Furthermore, Virgin has been able to deal with the potential downsides of autonomy and decentralization. To prevent the breakdown of communication links and individual business units pursuing their own strategies in an uncoordinated fashion (that could potentially be detrimental to the umbrella Virgin brand), the Virgin Charter sets out a management system and internet business strategy that takes advantage of information technology and the digital age to further establish the Virgin brand. A single website, Virgin.com, is where consumers can go to have access to all the Virgin services under one single portal. This is an example of cross-branding, to which has made Richard Branson millions.

This strategy helps to reinforce the corporate parenting strategy and enhance the synergies already derived from the corporate branding of the Virgin Group. By aggregating all the services into a single Virgin portal, the customer is able to access multiple services through a single distribution channel, and is enticed to turn into a вЂ?Virgin Customer’ where he comes to Virgin for his telecommunications, banking, terrestrial and extra-terrestrial transportation (Virgin Galactic), entertainment and internet service needs. In this way, the disparate Virgin businesses are able to gain from the successes from their corporate siblings вЂ" Virgin Rail gains customers referred from Virgin Mobile visiting the Virgin.com portal, while Virgin Money gains customers referred from Virgin Records, and so on.

Whilst if we look In comparison, competitor banking companies would hardly dream of marketing their services to a music crowd, while competitor railway companies would be hard pressed to market to mobile customers of an unrelated company. Even though the individual business units are in unrelated fields, the unified corporate strategy allows them to contribute to each other in a synergistic manner.

QUESTION 2: What environmental influences have particularly affected the Virgin Group?

To fully investigate what environmental influences have particularly affected the virgin group, it is important to take into consideration just what affects virgin’s business environment. And exactly what is the virgin group is it based as an open or closed business system?

The answer is its baseline fact, that Virgin group is a multi international commercial/ profit seeking organisation, it is based as an open system as they, are influenced by environmental influences/changes,

eg to customers and technologies and must respond to these environmental influences.

All organisations operate in a wider environment, and how people understand, interpret and interact with that outside world affects their performance. Each business is unique, so the external forces that affect them (and which they try to influence) will differ between them. For Richard Branson’s Virgin group, the external environment has constantly been affected by threats and opportunities. Environmental forces do not affect the practice of their own accord.

These are the factors from the external environment that could affect the Virgin group business.

There are two methods to determine just in which way Virgin group is bring affected by particular environmental influences:

1. Porters five force analysis

“Five Forces Analysis helps the marketer to contrast a competitive environment. It has similarities with other tools for environmental audit, such as PESTEL analysis, but tends to focus on the single, stand alone, business or SBU (Strategic Business Unit) rather than a single product or range of products”.

Porter’s five forces are:

the threat of entry

the power of buyers

the power of suppliers