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Virgin Group Strategic Development

The Strategic Direction and Development Of Virgin Group

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Virgin Group Strategic Development

  1. 1. Strategic Development at Virgin 2013 Case Study
  2. 2. 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.
  3. 3. 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’.
  4. 4. 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.
  5. 5. “A business has to be involving, it has to be fun and it has to exercise your creative instinct ”. Personal Philosophy
  6. 6. 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.
  7. 7. 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.
  8. 8. 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.
  9. 9. 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).
  10. 10.  Money In 2007 Virgin acquisitioned Northern Rock, a medium- sized UK mortgage provider, to enter financial sector. Virgin Growth
  11. 11. The Breadth of the group activities
  12. 12. Strategic Development Directions Market Penetration Product Development Market Development Diversification Existing Product New Product ExistingMarketNewMarket
  13. 13. 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.
  14. 14. 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.
  15. 15. 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.
  16. 16. 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
  17. 17. 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.
  18. 18. 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.
  19. 19. 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
  20. 20. 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.
  21. 21. 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.
  22. 22. 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.
  23. 23. 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.
  24. 24. 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.
  25. 25. 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.
  26. 26. TEAM MEMBERS SAMAR HASAN 8132484 HANEEN YASSIN 8132472 LAYLA ALIA 8130261 MANAL DARDOUR 8132726 REEM SHATARAT 8131444 SEMA MUSHTAHA 8142413

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