Virgin Group Analysis - It is the final mandatory assignment PDF

Preview

Summary

It is the final mandatory assignment ...

Description

(ID:1737469)

“Virgins at business; Virgins at crime”

CORPORATE STRATEGY PART A INDIVIDUAL ASSIGNMENT – 12 CATS

Word count: 2010

(ID:1737469)

VIRGIN’S BACKGROUND Virgin company was created in the 70´s by Sir Richard Branson and Nik Powell. The name of “Richard Branson” sounds familiar for some generations and he is really well known around UK and Europe, his life is a history of personal growth, initiative, restlessness, self-confidence and entrepreneurship. A teen suffering dyslexia, leaving the school at the age of 16 and having a failure marks recording, Richard founded his first company in the year 1968 in a church basement, the magazine called “Student Magazine”, it was created to provide an alternative to the stale publications and school magazines of the day (covering topics from pop culture and music to Vietnam and Biafra wars), after his first own business he decided to jump into the music world by using the home delivery system to sell music records, idea which came up after travelling across Europe and observing the different prices of the music albums, it would be the seed of “virgin records”, the successful outlet company that led the name of Richard Branson to the top with his first album worldwide succeed published, “tubular bells” of Mike Oldfield. Virgin team knew how to turn a threatened into an opportunity by opening their first physical store in Oxford Street while taking place a mail sector strike who would had damaged the company sells, based on home delivery system until that time. His Virgin empire grew from a record label that brought us both the Sex Pistols and Boy George to encompass airlines, rails, and mobile phone service. In the process, it has also spawned a fair number of busts: Virgin soft drinks, Virgin fashion lines, Virgin makeup. Nowadays, the conglomerate embraces more than 400 businesses, operating in different industries as transport (aeronautics and rails), music, telecommunications, banking, healthcare, hospitality etc. In this report we are going to analyse the general features and strategies of the group and the principal interest companies as media and airway businesses. MUSIC AND MEDIA SITUATION

At the very beginning, the music market did not seem a really easy sector to get in. Nevertheless, the founders differentiated their business model by changing the selling channel by setting up a home delivery system. During the 70 years, the music production experimented a boom driven by the heritage and emergence of social movements as hippies and psychedelic in the 60’s and musical cultures raise. Musical groups like “The Rolling Stones” and “The who” got advantage of The Beatles break down and appeared new groups with new styles as Led Zeppelin and Deep Purple, which would be the germ of heavy metal. The Rock culture suffered a transformation, creating a huge spectacle around Rock concerts, with artists like David Bowie and Kiss. Also, the appearance of a minimalist and faster style of music, The Punk, showing up with groups really well known as Ramones in EEUU and Sex Pistols in the UK. In those years, the free movement of goods between the European Countries was not implemented yet and the difference on the prices of the music albums made Richard Branson to come up with the idea of re-selling hits at the first time (reason because he end on prison for tax fraud), later the virgin group changed the business position by remastering and creating a discographic, producing albums under his own name

(ID:1737469)

“Virgin Records”, publishing worldwide successful hits from Sex Pistols, Mike Oldfield and others. The music industry has been changing a lot among the last years as a consequence of the technological revolution, the digital media has come after the traditional one, and it has meant the fall of many companies of the sector, but others has known how to adapt their business to this change. Now, the group is being driven by Branson and his right-hand man, Josh Bayliss (executive director since 2011) VIRGIN’S STRATEGY & COMPETITIVE ADVANTAGES Here, we have to talk about differentiation and cost advantages. While talking about the different behaviour and strategies taken by the company to run the business. First of all, one of the strengthens is the vertical integration that the company achieves in the music industry by launching the discographic after having created the stores, and a bit later with the radio and media platforms, to sell his products through his own channels and then, being able to reduce costs in comparison with competitors. At the very first stage they differentiated their business with the home delivery system, but after that they focused on reducing costs by vertical integration and finally, innovating because of the technological revolution by integrating the new systems and selling channels that appear in the market and the customers’ demands. The groups also launched some focused platforms and products but Porter’s focusing is not his main issue of competitive advantage. SOURCE OF COMPETITIVE ADVANTAGE Low cost

Differentiation

COST LEADERSHIP

DIFFERENCIATION

Industry-wide COMPETITIVE SCOPE Single

FOCUS

*Blue different levels are the competitive advantage strategies more taken by the company

linked to

In terms of Cost Advantage, the company has driven this advantage by the use of economies of scale and learning and residual efficiency generally speaking. Because the company controls the value chain on this business, the group owns from the music production to the physical store, then, they are able to minimize costs and achieve a really high effectiveness. The learning scope can be seen on how Virgin has worked due to the high skills, experiences, intellect, talents of its employees and their desire of outperforming.

(ID:1737469)

They also have an organisational culture and a high employee motivation rate, “Virgin's product and services reach the customers with a fun, value, and success. Virgin is empowering employees and attempts to innovation services and products and offer it to its customers” (Grant, 2012) Generally speaking and given the diversity of the businesses, the strategy followed by the company is held in some different advantages: 

Cost advantage: the group started to compete on different markets after having a huge turnover in the music industry and then, they try to compete in costs in other markets.

“Virgin to achieve competitive advantage is taking researches and doing analysis about the industry, with offering its services and product at a competitive price” (Grant, 2012). 

Innovation: Virgin has always been known by its degree of innovation. Beginning with the spirit of its founder, what has become an inspiration and core value of the company. Now, the staff consists of enthusiastic individuals with successful careers. For example, probably the biggest innovation is the followed by the business “Virgin Galactic” with its space race. And talking about Virgin Media: Virgin Media was the first company in the United Kingdom to offer a “quadruple play” of fixed-line telephony, TV, broadband and mobile services from a single provider."



Growth and diversification: Due to excellent management practices as the diversification carried out while offering a really good quality services and products at a competitive price, being able to seeing a challenge after recognizing a new market or trend to get involve.



Customer service: the customers provision by an exceptional service is one of the main objectives of its strategy. One good example of this will is the launch of Virgin airlines, at the first time Branson just came up with this idea because he had been treated badly

*And others like: Using brand name to overcome barriers, limiting risks, management flexibility and being good at understanding institutionalized markets The Virgin group general corporate rationale was sacrifice their short-terms profits in exchange of longer term growth and therefore they were able to use a different business level decision making method. DIVERSIFICATION AND VERTICAL INTEGRATION (SBU)

(ID:1737469)

For Branson, the five pillars of the business empire: travel, leisure, mobile phones, entertainment retailing and personal finance. Some of the different businesses are vertically integrated, making synergies and controlling the value and production chain, known as strategic business units. But Virgin group drive businesses in really different industries, from the music production or hotels to the aeronautic industry. This is one of the most important features of the company, the diversification performed, it is a big strength of the group, because then they are not prisoners of any particular industry and they are able to grow up faster and easier than companies closed in a specific industry. -

-

-

Media and music production, the group get some synergies by publishing hits and launching it through their own channels. The first example of linking businesses is the creation of Virgin Records after having music outlets, controlling the distribution too. After that, Virgin launched some media platforms, as Virgin Radio and other means of communication. More specifically, in the media sector, over the past 20 decades, the integration between content producers and distribution companies has reshaped the entertainment industry. In the mobile services, virgin makes strategic relations between the broadband, phone and digital services as well. “Virgin Atlantic” and “Virgin Galactic” (a company that offers trips to space). When Branson launched the airline, the company just had the competitive advantage laid on the company size, trust and his great turnover. After that, Virgin started to diversified, apart from being a common strategy to reduce risk and growing, it became a real obsession for Virgin. It has the distinction of offering the lowest fares for packages in the Atlantic and other parts of the world and fly to the more unknown and less-travelled destinations. Virgin travels: hotels and Virgin Holiday, offering packs through their travel agency (putting into play the hotels and all linked to the aviation and balloon travels)

As seen, Virgin is partial or fully integrated in some of its businesses and it gives to the company a huge extent of influence and power because of their diversification that seems impossible to crash. Virgin Group enters in markets internationalized or more local ones (like the UK railway) during the growth stage and take advantage of the surprise tactic. So, as we told before, the company offers low cost and it starts to compete against others big companies using his good known brand name. It is a good way to open a market in an industry that may have become too comfortable in a pseudo-monopolistic in which was none competitors.

CORPORATE CENTRE AND STRATEGIES IN DIFFERENT BUSINESSES The company is known itself as a restructurer, so its corporate centre is not too big and their central costs are minimum. As we have seen before, the group has some competitive advantages and gives value to its businesses, which share ideas, values,

(ID:1737469)

interests, goals, and the most important, they share the same brand. Therefore, the Virgin Group as a corporate parent have set standards and helped the businesses know exactly how to create value to the customers and how to ensure that the brand name is upheld. Strategies as well, are really common between different units and are just differentiated by sectorial features and needs. The cooperative strategies are the most effective in the group units, alliances and partnerships are of the most importance to the group because they make it possible to differentiate their products to a higher degree. The accessibility to more capital, knowledge, and skills yields an exceedingly differentiated brand name. LATEST CHALLENGES & SUGGESTIONS The company has had some problems in the last decades: Virgin Atlantic: The industry is cyclic and the deregulation increased in 2001 the competition in the market place; Virgin trains: UK revision to Virgin trains in 2000 have been one of the biggest problem faced by Virgin Group, it resulted to be the most “unpopular” rail operator proved by some statistics. The value of the brand fell as a consequence of these matters. This is the dark side of having plenty of businesses in your hands. It is a good publicity when things work well, but it turns against you when the reputation is in doubt. More recently, the group had to fight against some obstacles: In Mexico with Virgin Mobile and the cooperative companies that are able to offer better prices; Some challenges at the F1 business too and knew how to overcome the obstacles. As a general suggestion, Virgin operate in such number of industries that it becomes complicate to control or supervise all of them, that is why I think they could become less diverse.

(ID:1737469)

REFERENCES:

Anonymous2001, Jul 29,. Executive of Virgin Group Outlines Corporate Strategy. Sunday Business (London).

Examination of the Virgin Group corporate strategy23rd March, 2015-last update. Available: https://www.ukessays.com/essays/marketing/examination-of-the-virgingroup-corporate-strategy-marketing-essay.php.

Forbes Global 2000: The World's biggest public companies;2006 SRI C3950-1.911.4. 2006.

GRANT, ROBERT M (1948- ), 2016. Contemporary strategy analysis: text and cases. 9th edn. Chichester: Wiley.

Speak, Branson. “Why customer service matters.” Livemint.com. 29 November 2010. Web. 30 2010. http://www.livemint.com/2010/11/08203327/Why-customer-servicematters.html?h=B

The history of Virgin . Available: https://www.virgin.com/time-machine.

ZANA MAJED SADQ, Virgin Group Success Businesses: Diversification and Key Strengths. Account and Financial Management Journal, ....