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Virgin Group’s Strategic Development and Success Case Study


Executive Summary

This paper reveals the analysis of the Virgin Group and its operations. It identifies that a strong brand name and high quality of products and services provide the company with an opportunity to remain one of the international leaders. The corporate strategy and structure of the Virgin Group are discussed in detail. Strategic relationships among sub-companies and with other organizations are described. Various types of analyses are maintained in order to point out both positive and negative factors that affect the company. On the basis of the obtained information, recommendations for the future are made, and issues associated with the leader’s departure are considered.

The Virgin Group

A well-known entrepreneur Richard Branson opened his own company almost 40 years ago and made it one of the largest private organizations in the UK. It does not focus on a particular product but emphasizes diversity and can be found almost in every industry. Branson leads companies that work with communication technologies, transportation, entertainment, and publishing, etc. However, like all other organizations, it still has an opportunity to improve its performance. Moreover, the shareholders are highly concerned about the possibility of Branson leaving the company, as he is the one who turned it into a top company.

As the company has existed for a long time already, it has followed several strategic development directions. For instance, it resorted to market penetration and diversification. A lot of attention was paid to the product and market development. The organization operates as a group of companies, which allows them to work separately, maintaining financial independence. Each of them focuses on a shared-alone basis but values commitment to the Virgin Group and shares its views.

Even though sub-companies are led independently, their corporate parent makes them look more trustworthy due to its reputation, experience, and effective marketing skills. Thus, such an approach is relevant to different businesses, as it reduces risks, improves recognition, provides mutual ideas, and shares knowledge. With the course of time, it should focus on the creation of a corporate image that is not associated with Branson and avoid adverse cash flows, shutting down unprofitable sub-companies.

Corporate Strategy

The Virgin Group manages to reach outstanding achievements due to its leader. Branson is a person who attracts not only customers but also experienced personnel. His leadership style and charisma are aligned with the knowledge of business processes and turn out to be extremely beneficial for the company. In this way, the success of the Virgin Group can also be explained by its staff. Unique brand recognition makes the company difficult to replicate and allows it to win competitive advantage (Grant & Jordan, 2012).

The Virgin Group consists of numerous companies, and their management teams are free to share their considerations regarding ongoing business and to offer innovative approaches to further development. A lot of attention is paid to the market and customer analysis. All actions maintained by the management are based on the market analysis and identification of clients’ needs and demands. Working with managers, Branson encourages them to be creative and innovative to make a profitable change.

He is willing to make them feel more responsible so that they manage to cope with existing issues themselves without seeking help. That is why the management teams are carefully created. They consist of people with a competitive nature aligned with the leader’s characteristics. They also have excellent team abilities needed to work with numerous people.

Brand Strategy

The Virgin Group already has a market value associated with its name, which provides it with an opportunity to attract new clients and ensure the loyalty of those who resort to the company for a while, providing them new products that meet their needs and quality expectations. The organization sells all products under its brand, which makes clients sure of their characteristics. As a result, clients buy products repeatedly, as they trust the company and believe it to be a responsible supplier.

Branding is profitable for the Virgin Group because it provides an opportunity to reduce advertisement expenditures. Sub-companies do not need to spend more resources to prove that they are trustworthy and already have a particular targeted market. However, if some product fails to appeal to clients, it can affect the image of the whole Virgin Group.

Emphasizing its good reputation and adding value to various products, the company puts its name tag on each of them. In this way, the representatives of the general public can understand what to expect from their purchases. This strategy is used for the products of different fields (Johnson, 2014). It can be found in traveling and tourism, leisure, beverages, social welfare and environment, and media.

Clients can find their games, books, clothes, spa, wines, soft drinks, music channels, mobiles, and even finance and health banks. In general, the company divides its products into two types. These are convenient (frequently bought by all types of clients: mobiles and books) and no requested (clients lack knowledge and interest: extra-terrestrial travels) products. In this way, the company is focused on those clients who value innovative products of high quality and love fun.

Corporate Structure

The structure of the Virgin Group differs from many other organizations due to the peculiarities of its business. This private company operates in different fields simultaneously and consists of numerous sub-companies. They all are linked but very tightly, which allows them to remain self-managed. In this way, the Virgin Group seems to gather different private companies, focusing on the benefits for shareholders, stakeholders, and financiers. As a result, the organization does not focus on short-term goals and targets on the long-term ones, which is extremely beneficial for its future.

The Virgin Group operates under the leadership of Branson and his trusted employees. Individuals who are working in the head office have the freedom to alter the financial structure of the organization if the proposed changes improve its performance.

Through the emphasis made on branding, sub-companies manage to learn about successful business tactics and get international recognition, which provides them with an opportunity to promote rather fast and obtain both the large and small scale company’s profits.

The business of the Virgin Group is controlled by a centralized unit. One desk at the head office manages to cope with these operations. Clients can access all company’s offerings using its website. The Internet is used for coordination between the sub-companies as well. As a result, the possibility to reach more clients is obtained.

Strategic Relationships

The Virgin Group appeals to the UK population emphasizing the fact that its leader is Sir Richard Branson. This is a kind of psychological strategy that affects both the stakeholders and competitors. Branson is known as a successful person that is why his active participation in marketing promotes the company. It also proves that the Virgin Group is likely to benefit if it continues developing further because there is a great demand for it and its products.

All sub-groups sacrifice their short-term profits because they realize that such a focus can be beneficial only for each of them separately, while no significant advantage for the whole brand will be observed. The utilization of an individual level business strategy is advantageous because it provides managers with the opportunity to make important decisions themselves. In this way, they become more responsible and ready to operate independently.

It I also interesting that the assets and finance matters are used only for a particular sub-company. They are not shared, which provides an opportunity for one sub-company to take the place of another one.

The management team of the Virgin Group consists of employees who have innovative ideas and are willing to develop their businesses winning competitive advantage. In addition to that, they are encouraged to undertake Branson’s leadership style and receive hints on how to serve customers better. As a result, it successfully identifies complacency in the market. Its brand name allows avoiding entry barriers faced by sub-companies because it is highly respected by the representatives of the general public. In a similar way, the risks in the market place for those organizations that are in a joint venture with the Virgin Group are limited.

Even though Branson is the main leader of the company, he does not restrict management and even encourages them to innovate and make decisions under a flat management structure that is rather flexible.

PESTEL Analysis

Political factors

The Virgin Group operates in numerous countries and adapts to its peculiarities. It follows the rules and regulations of each of them and does not put enormous emphasis on generalization. The company aligns its practices with government rules. As a result, it managed to become one of the most trusted companies in the UK that has an enormous influence on the stakeholders.

Economic factors

The Virgin Group operates with partnerships in the majority of cases because they provide an opportunity to extend businesses with minimal investment. However, the influence of the global recession cannot be totally avoided. Because of it, the organization may face a necessity to close some sub-companies and to lose jobs. In this way, the influence on the business strategy can be observed. Operation levels depend greatly on the clients’ demands and needs. The most competitive services and products are emphasized by the Virgin Group. A lot of attention is also paid to fluctuations. In the framework of both the local and international markets, they are believed to increase risks of losses. What is more, they have a direct influence on the business strategy.

Social factors

All sub-companies of the Virgin Group pay enormous attention to social responsibility. They emphasize the necessity to provide high-quality goods and services that can satisfy the diverse market of clients. This is the first priority of the company, and it is even mentioned in the mission of the company, as it is targeted at the provision of outstanding services. Moreover, the quality of the products and their prices are to be aligned with the economic conditions of the customers.

Technological factors

It is significant for the Virgin Group to keep in touch with its sub-companies and stakeholders; that is why it pays a lot of attention to technologies. The organization updates its software, hardware, and technical knowledge on a regular basis to ensure that they are appropriate. As a result, it receives an opportunity to serve its customers with the greatest potential. In addition to that, such an approach allows avoiding technical mistakes that can have an adverse influence on people’s condition. Internet services and wireless technologies are also constantly updated (Sadq, 2016).

Environmental factors

Nowadays, businesses need to emphasize those practices that are friendly towards the environment because pollution and related issues are often discussed by the governmental bodies and the representatives of the general public. Being aware of these increasing concerns, the Virgin Group started using the first bio-diesel train. It managed to start this practice earlier than other companies, which improved its competitive advantage. Similar interventions are made by various sub-companies to take care of the clients and satisfy them. All in all, the organization is concentrated on the development of a long-term environmentally-sustainable plan.

Legal factors

The Virgin Group needs to align its practices with the laws of those countries it operates in. In this way, the company pays needed all taxes needed to maintain business. In addition to that, it focuses only on those operations that are allowed by the country. Finally, the Virgin Group differentiates its products so that it provides only those that are allowed by the law.

SWOT Analysis

Strengths

• Brand name. The Virgin Group is rather popular in various countries, and its sub-companies resort to its name in order to promote their products and achieve success. A strong brand name allows them to be at the top of leaders in countries like the UK, the USA, and Australia. Emphasizing the fact that products come from the Virgin Group, sub-companies receive an opportunity to improve promotion and reduce expenditures.

  • Distribution. The organization operates with two distribution units. They are of different types, which provides an opportunity to improve selling. The first type is focused on the products that are sold in retail stores. The second one is used to sell goods online. As a result, clients can choose the most convenient for their options.
  • Export. The Virgin Group operates in a number of countries, that is why it is critical for it to transport things abroad. It utilizes various facilities to export its products. For example, it resorts to international airports and seaports that operate under the company’s brand name.
  • IT professionals. Technology is used in various spheres today, and it is critical for the Virgin Group and its sub-companies. Highly skilled personnel who work with software and hardware improve operations constantly and provide clients with services of the best quality.
  • High budget. As the Virgin Group consists of many successful private companies, it manages to obtain enough money to support any business. Its investment allows it to earn huge profits and expand abroad due to the focus on long-term goals.

Weaknesses

  • Supervision. A lot of sub-companies operate under the name of the Virgin Group. All of them have their own management teams that are encouraged to be rather independent. As a result, it is difficult to supervise them and to control their operations.
  • Communication. Sub-companies need to share information to improve their performance and ensure that they benefit the Virgin Group. Unfortunately, it is maintained only with the help of the website. In this way, different business sectors communicate poorly.
  • Transportation. The transportation facility lacks sufficient timetable. Public transport does not maintain punctuality, which has a negative influence on the company’s progress.
  • Machinery. The Virgin Group has been operating for decades already. It pays much attention to the updating of its software but is less concerned about machines used to produce its products and services. Some of them are outdated, which creates difficulties for customers and personnel.

Opportunities

  • Expansion. Having a lot of sub-companies, the Virgin Group has a constant opportunity to expand abroad even though its products are already familiar in many countries.
  • Partnership. The company is able to expand its business by cooperating with other organizations. Developing beneficial deals it can improve its performance and attract even more clients.
  • Training. The Virgin Group is constantly developing, and its employees need to be aware of all operational peculiarities in order to cope with their duties appropriately. Additional training is likely to enhance their knowledge and to have a positive influence on practice.
  • High technology goods. Technology constantly develops, which provides the company with an opportunity to improve both software and hardware in order to streamline production and improve customers’ understanding of the provided services.

Threats

  • The company operates under the corporate parenting strategy. It is successful due to the leadership of Branson. He is able to make the company go well and win the competition, but it is not clear if the Virgin Group will be able to maintain the same success without his guidance.
  • As the organization is mainly targeted at long-term goals, it is critical for it to operate all the time properly because possible issues can have a negative influence on the company’s operations.
  • The Virgin Group is under the threat of Branson’s decision to leave. The organization needs strong leadership for the future. Without it, the company may not be able to work according to appropriate policies and strategies needed to achieve success.

Porter’s Five Forces Model

The threat of entry. The Virgin Group, as well as many other companies, was affected by the economic recession. As a result, this organization has many price-cut services and products (Grant, 2012). The threat of new entry for different sub-companies is not the same. For instance, it is rather low in the training sector but high in the airline industry.

The bargaining power of the buyer. Due to the increased competition, the Virgin Group is to attract clients. Branson’s leadership helps the company to create a great team of employees who maximize the selling, providing competitively priced products directly to the customers. For the railway business, for example, the bargaining power of clients is rather low because it deals with the necessity to travel this way.

The bargaining power of supplier: The Virgin Group meets the standards related to the brand name reputation that is critical for suppliers. However, they are able to decide whether to supply the company or not. They also can increase prices.

The threats of a substitute: The Virgin Group consists of various sub-companies that offer similar products and services. Its offerings also can substitute one another, for instance, trains can be changed for airplanes or private vehicles that are also owned by the Virgin Group. As a result, the threat of being substituted by other companies is minimalized.

Competitive rivalry: The Virgin Group develops rather fast. However, its development should not focus on competition with other organizations. The most advantage is likely to be obtained due to the emphasis on new business opportunities (Grant, 2012).

The Future of the Company

The Virgin Group has a lot of strategies to be implemented in the future due to its focus on long-term goals. Branson is implementing them step by step, and his ideas are to be continued with the course of time even if he decides to leave. The company is willing to enter new sectors of business and to maintain partnerships with other organizations (The Virgin Group, 2017). Operating in developing countries, it is willing to provide products aligned with potential clients and their needs. As a result, the share in the market is likely to increase, and the company’s name will become even more recognizable and respected.

These plans are likely to be successfully achieved because the Virgin’s management team is good at identifying the market situation. Its experience and business strategy proved to have a positive influence on the overall performance. The company’s brand name will assist in this process as well due to its reputation. It will be advantageous for the company to continue focusing on joint ventures and limit investment in new products because these practices have already proved their effectiveness.

Even if the current leader of the Virgin Group leaves his position, the company should keep managers free to make decisions, as it makes them more responsible. They should also continue focusing on innovations and differentiation, as the industry develops constantly. As these approaches have already made the company successful, they are likely to continue benefiting it.

Recommendations

Even though the Virgin Group manages to be one of the top companies in the international market with its current practices, improvement is likely to be achieved due to some alterations. For instance, the organization can limit its diversity. Its brand name is already associated with numerous industries, but it is not enough. More attention should be paid to the analysis of the environment.

The company may spend more resources on the real expertise to limit risks and ensure that its sub-companies add workable value. However, it is also critical to ensure that the stakeholders do not consider that the Virgin Group’s main target is to avoid risks but not to benefit them.

It may also be beneficial to pay more attention to short-term profits that are mainly ignored today. Both independent and joint ventures should think of the opportunity to increase income and raise capital as soon as possible. Even though such an approach is less advantageous for the whole Virgin Group, it is likely to be extremely beneficial for its sub-groups. The ‘ring-fenced’ can improve the situation significantly in low times. In this way, the company should adjust to the busy seasons and be ready to change, depending on the environment.

As Branson is willing to leave the company, the Virgin Group may face some issues. Its brand attracts customers and appeals to suppliers. It is tightly connected with Branson himself, which means that it may become less valuable.

The company does not have a formal organizational structure, so another leader may find it difficult to operate appropriately. Both financial situation and succession planning are to be considered before Branson leaves because they can affect the company’s ability to survive. Creating a centralized decision-making body, Branson may make it easier for a new leader to get involved in all operations. Creating corporate headquarters, he can also ensure that all sub-groups follow the same advantageous policies and financial decisions.

References

Grant, R. (2012). The Virgin Group in 2012. Web.

Grant. R. M., & Jordan, J. (2012). Foundations of strategy. West Sussex, UK: John Wiley & Sons Ltd.

Johnson, G. (2014). Exploring strategy (10th ed.). Edinburgh Gate, UK: Pearson.

Sadq, Z. (2016). Virgin Group success businesses: Diversification, and key strengths. Account and Financial Management Journal, 1(2), 78-83.

The Virgin Group. (2017). Web.

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