STRATEGIC DEVELOPMENT AT VIRGIN 2013

About the Virgin Group:

The Virgin group was started by Richard Branson in the year 1970. He was 20 years old when he used to
sell Mail Order records. He started Virgin Records initially. The company started gaining publicity as
their records started selling because of various stunts carried by the rock bands. Further he entered the
Airline industry by launching Virgin Airways in UK and competed with British Airways. Later on the
group grew vibrantly and developed its reach in almost each and every sector. They developed their reach
in segment like Media and Mobile, Lifestyle, Travel, Money, Music & People and Planet. They also
motivated entrepreneurs and encouraged in building up their ideas. They have more than 200 branded
companies and around 50000 employees across 34 nations. Their overall revenue is in excess of US $ 21
Billion.

The corporate vision is simply a projection of Richard Brandon’s own personal philosophy, which he has
introduced into the structure of corporate rational. The Virgin Group is comprised with many assorted
mix of businesses.(Rob Abdul, 30/01/02)

Corporate vision 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 vision is to diversity 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. The following will be discussed below.

The Virgin Group’s vision is to diversify into as many markets that are feasible.

They want to extend the Virgin brand name further at a low cost where stature could be relied upon to
help reduce the barriers for entry into a static market. The Virgin Group looks for a challenge in every
venture and aims to providing better quality products than the competitors do. The Virgin Group aims at
entering a market that is still in the growth phase. (Rob Abdul, 30/01/02)

The Virgin Group sees itself as a restructurer, this means that it has low central costs due to relatively
small corporate centre, with fairly minimal involvement at business level. However they vary from the
portfolio managers because they also set about trying to identify restructuring opportunities within their
businesses and have the skills and expertise in order to intervene and introduce these changes where
necessary. ( Jenn,2008)

The Virgin Group has a wide range of strategic business units about two hundred ranging from airways to
drinks, and makeup to publishing. Virgin’s corporate vision is that they try to enter “static” market, in
which there are few competitors and where consumers do not get value for money.The Virgin Group
enters these markets that are still in the growth stage and to try and shake them up, for example they did
this with Virgin Airways and Virgin Cola.

By entering the market that is still in its growth stage and has few competitors Virgin managed to produce
the product or service for a slightly lower price than all other competitors within the market then they
should , along with their strong Virgin brand name. Virgin Group gained a big market share fairly quickly
because they had lower prices than everyone else.

This is a good way in which to enter a market because it surprises the other competitors who may have
become too comfortable in this monopolistic market, and has a potentially huge initial gain. Using the
surprise tactic ensures that the other market leaders will not expected your move and result in a slow
response , for example when Virgin entered the airways market, the British Airways had not anticipated
them as competition and so were not prepared to be able to cut costs and compete. So Virgin Airways
gained a big share of the market very quickly.

Excellent management practices has also been refer to as a major strength of this group, and is there for
one of the most significant components of its corporate vision. The Virgin Group corporate vision was
also diversify into as many markets that were feasible and extend the Virgin brand name at a low cost.
The Virgin Group looked for a challenge in every venture and aimed at providing better quality products
to their customers and better than their competitors.

The Virgin Group corporate vision was to sacrifice their short-term profits in order to gain a longer-term
growth and therefore they used an independent business level decision making method. This corporate
vision allows the managers to make decisions independently for growth and feel the same degree
ownership and values that any other manager would feel in the Virgin Group. (Rob Abdul,30/01/02)

Virgin’s vision for expansion was based on fierce external diversification strategy and Richard’s constant
need to be creative in his approaches to new challenges. For Richard the brand is very important and is an
asset. The ultimate objective is to have an established global name and therefore the Virgin Group needs
to have a number of core businesses with global potential, with expansion this can be achieved.

Critical Success Factors

PEST ANALYSIS
Political factors:

 Virgin rail is running under single brand as it has partnership with stagecoach. Virgin has 51%
share and stagecoach has 49% share in the market.
 Virgin follows all the rules and regulations of the country it is working in and it pays all taxes and
makes policies according to the government rules.
 Virgin is Britain’s most trusted company and it has lot of customer following to its products and
has a great influence and bonding relationship with the people of this country.
 The political interference in virgin group is regarding financial matters as the reports are not clear
due to its partnerships with many companies.

Economic factors:

 To virgin most of the companies are running with partnerships and they are putting only to some
extent of money and they expand their business.
 The global recession has lot of affect on its company, like closing down or losing jobs may have
direct impact on its business strategy.
 Operation levels are increased and taking particular attention to the competitive services regarding
to customers.
 Fluctuations in the local and international market show the direct impact on the company’s
business strategy and may turn it into losses.
Social factors:

 The social responsibility of providing good quality services to its customers is its first priority.
The company has a mission to give outstanding services to all its customers according to the
economic conditions of the customer.
 Environmental concerns are increasing day by day. So company launched its first bio-diesel train
earlier than all other companies in Europe.
 Virgin has poor punctuality services which should be taken care and satisfy the customers by
addressing on time.
 Virgin mobile has offered different offers to its customers according to the social conditions of the
country’s situation.

Technological factors:

 Virgin is one company which always tries to update its software or its technical knowledge and
serve to its customers to a maximum extent.
 Virgin rail has always made updates in its technology or in its quality to its customers and made
the trains run punctually without any technical mistakes.
 Virgin group always updates in providing internet services and technologies in it as wireless
technology.
 Company policies also change according to the trend and interest of the customers.

Although the company had encountered different difficulties, precisely in line with its cost structures, the
company had been able to survive and grow in the market.  Virgin Atlantic implement different marketing
strategy to make the company last in the competition and to be able to gain competitive position in the
airline market.  It is said that the company was regarded recently as the most prompt airline between
Dublin and London. And because of the strategy of the industry, Virgin Atlantic is now known as the
second largest airline in United Kingdom having a network of over 57 routes in 11 countries and served
by a number of fleet.

In order to position itself in the marketplace the company continuously concentrates on driving own its
costs to offer the lowest fares possible and remain profitable.  In addition, Virgin Atlantic offer minimum
standards of service and very low prices for point-to-point, short haul flights.  The goal of Virgin Atlantic
is to meet the needs of travelling at the lowest possible price.  The Critical Success Factors (CSFs) are as
follows in airline industry: the strategic focus of having the lowest prices, being reliable within the
marketplace, comfort and service and frequency. 

It is noted that low-cost companies concentrate on this first critical success factor by trying to offer the
lowest prices.  Although Virgin Atlantic has eliminated extras such as in-flight meals, advanced seat
assignment, free drinks and other services, it still prioritizes features which remain important to its target
market. Such features include frequent departures, advance reservations, baggage handling and consistent
on-time services.

Company’s Strengths
Key to successful implementation of any strategy depends on how well the company uses or exploits its
strength in a planned way to reap more benefits. Virgin Group’s strong beliefs and ability to stand by
them is a major strength. They believe in providing customers with:
  Value for Money
 Good Quality
 Brilliant Customer Service
 Innovative Products
 Fun
Virgin Group's core competencies is that the product produced is slightly different than others. In
addition, Virgin try to add value by adding some fun. Due to the differentiation in the Virgin's strategy,
the ways of doing business and the fit of the activities also it differentiated from the competitors.

In addition to this, the owner’s extraordinary capabilities to employ media to create a brand image for the
company. Also, using the brand image to overcome any entry barriers in any of the new ventures. E.g.
Virgin Rail gains customers referred from Virgin Mobile visiting the Virgin.com portal. Virgin Money
gains customers referred from Virgin Records, and the list goes on.

Virgin Group also utilised its financial capabilities and the joint structure of the organization allowing to
collaborate the incomes to nullify the losses in some of the ventures by the profitable ones. They also
excel in combining skills, knowledge, and expertise to build exciting and successful companies.

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.

Virgin’s Business Strategy

The Virgin Group uses an integrated set of business level strategies to gain a competitive advantage in the
market by exploiting its core competencies and matching its strengths with opportunities in its respective
individual product markets.
According to the Ansoff’s Matrix - Diversification strategy there are four strategic different with each
other that directs for the corporate-level strategy that are related to the decisions about the market scope
and the product, and the way that the firm has to require to add value to them: Market parenting, product
Development, Market Development, and Diversification (Ansoff, 1984). The Virgin Group‘s principle is
to diversify into every bit many markets that are executable. (Unrelated Diversification)
In the case of Virgin, unrelated diversification has certainly been a successful strategy in terms of
maximising profitability. Looking back to 1970s and the start of its operations as a record mail order
company and record store soon after, given the rapidly changing nature of the music industry since, it is
possible that the company would no longer exist if it hadn’t innovated in this way.
However, the ‘unrelated diversification’ strategy is far from full proof and there are numerous examples
in which it has failed for Virgin. Perhaps the most high profile case is the short rise and rapid fall of
Virgin Cola in the mid-1990s – following an ambitious, yet unsuccessful plan to compete with Coca-Cola
and Pepsi. Despite the ever-growing fizzy-drinks market, conditions were not conducive to Virgin’s entry
due to the existing players’ ability to block access to widespread distribution and a backlash in advertising
spend – which ultimately limited Virgin Cola to just a 3% market share on its home UK turf before
exiting.
Although Virgin does use some pieces of the cost-leadership strategy, Virgin mainly uses the
differentiation business level strategy to try to better develop its brand image and capture profit
maximization.  The main reason for it to falter in its cost-leadership approach is that it does not have its
own manufacturers.
Virgin Group has had a mixture of success and failure when it comes to its diversification strategy into
unrelated businesses. Most of the initial decisions by Richard Branson for unrelated diversification when
were opposed by shareholders on the grounds that they were already doing good in the current business
and the risk was too high for diversification. However, the founder maintained a firm stance for this.
Virgin is a great example of a group which has been very prudent in entering new businesses as well as
practical in exiting the loss making business with minimal sentiments.
Looking beyond the risk of failure, I would also argue that unrelated diversification creates further risks
in terms of losing brand strength, by blurring the delivery of a single strong message. Virgin used to have
the image of being a rebellious brand that resonated strongly with its young audiences through music and
records – a lifestyle in itself almost – but with Virgin Money and Virgin Trains, it doesn’t have that single
message and association any more. Today, the host of sub-brands do not comfortably fit together in a way
that Virgin can define itself as meaning something, which goes a long way towards explaining why
Virgin isn’t a leader in any of its industries.
However, the Group has had a very progressive status overall. Some of the key takeaways from Virgin
Unrelated diversification can be:
 Invest in employees. Virgin Group takes special initiatives keeping the interests of its employees
on top. Workers have the liberty to make decisions like their vacation periods, work from home
options, etc. This kind of open atmosphere boosts the work ethics of employees which ultimately
sees a more comfortable transition for each new businesses
 Build strong internal competencies. Sir Richard Branson is a strong promoter of the fact that for
any business to be successful, the attitude within the organization must be conducive for it.
Virgin’s unrelated diversification was based on the approach of identifying industries with high
profit potential. They would target businesses where they have the internal competencies that gave
then competitive advantage.
 Reasons to choose a Business is to provide an unmatched quality product even if the market
already has well-established players. Virgin can attribute much of its successful ventures to the
fact that they offered something unique in terms of service and experience in business where there
was little differentiation at the time.
  Create a unique product offering that becomes a signature for the brand over time. The internal
competencies of providing excellent customer service are cross utilized across all the businesses.

REFERENCES

 https://ankurkislaya.wordpress.com/2017/10/17/virgin-group-corporate-strategy-unrelated-
diversification/
 https://screwedopinion.blogspot.in/2013/09/strategic-management-strategic.html
 http://everant.org/images/afmjissue/v1-i2/1.pdf
 https://themarketingagenda.com/2014/10/25/virgin-unrelated-diversification/