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Virgin Group Success Businesses: Diversification, and Key Strengths.

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 Everant.org/AFMJ Case Study
Account and Financial Management Journal

Virgin Group Success Businesses: Diversification, and Key

Strengths
Zana Majed Sadq

Department of Management, Faculty of Humanities and Social Sciences, Koya University, University Park,
Daniel Mitterrand Boulevard, Koya - Iraq

ARTICLE INFO ABSTRACT

Virgin Group is the largest private enterprise in the UK which includes of an
assorted mix of businesses. It is considered to be one of the most worlds
respected brand name and venture capital organizations established by Sir
Richard Branson in 1970. The name Virgin has been selected to correspond
to the plan of the firm being a virgin in every business it entered. The Virgin
group businesses success increased in different sectors such as;
corresponding Author: transportation, music, financial services, soft drinks, mobile telephony, travel,
Zana Majed Sadq and media.
KEYWORDS: Virgin Group, capabilities, Key Strengths, and Diversification

Introduction: order to the equity of the brand. Secondly, it is

Nowadays, Virgin is employing more than considered to be "rare" for the Virgin brand name
50,000 people (Virgin, 2012), and created because Virgin has positive perceptions of its
approximately 300 branded companies in 25 customers, name linked with words like;
different countries. The major points behind the 'innovative', 'successful', value for money, and the
Virgin's growth might be linked to Sir Richard most important the trust to the Virgin group's
Branson and Virgin brand name, with its unique businesses. The third point, "imitability", Virgin
culture of management style with minimal over time, was successful to make brilliant
hierarchy and management levels (Grant, 2012). reputation, therefore it is difficult for the
According to the Resource Based view, resources competitors to imitate the Virgin's products and
which are scarce, difficult to imitate, valuable and services. Finally, Virgin's competitors replace
are not replaced by other resources are considered resources that might provide and supply to the
as a competitive advantage for the firm (Grant and same actions as equity of brand and corporate
Jordan, 2012). The Virgin group's core competence reputation.
is their Brand name. The Brand name is difficult Competitive advantage has been
to imitate for its competitors. It has leveraged established by Virgin Group among its
widely in many products and markets. It has also competitors by providing services and good value
contributed to the end customer’s experienced to the consumers in different ways. The Virgin
benefit. Branson's businesses had the high Group's businesses basic and the core competence
ambition of expanding the business by using the are to produce goods a little bit differently from
brand name of the Virgin. That’s why the business the others. In addition, Virgin attempt to add value
of Virgin group did not stand still within some to the ventures by adding a little fun. Due to the
specific industries but expanded enormously. First differentiation in the Virgin's strategy the ways of
of all, the Brand Name of Virgin is "valuable" in doing business and the fit of the activities also it
differentiated from the competitors.
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 Furthermore, Branson owned unique for example purchasing tickets online for
capabilities, such as his ability to successfully airlines and trains.
employ the media to grow Virgin's public
awareness, besides Branson's possesses of  Outbound Logistics: Outbound logistics
excellent charisma and superior negotiation skills. refer to distributing service or products to
The capability of the Virgin's unique culture of buyers or customers (Dess et al, 2010).
generating uniqueness and making differences, Virgin's product and services reach the
also the Branson's ability to maintain the unique customers with a fun, value, and success.
company's management style and structure aid Virgin is empowering employees and
Virgin to be successful. Valuable capabilities will attempts to innovation services and
support the Virgin Group in the external products and offer it to its customers
environment to successfully search and analysis (Grant, 2012).
with attempts to minimise threats as well as
looking for the opportunities. Capabilities have to  Marketing and sales: Virgin to achieve
be used efficiently, they will turn important and be competitive advantage is taking researches
hard to be substituted or imitated. Innovation is and doing analysis about the industry, with
the Virgin Group's main marketing strategy, offering its services and product at a
which it is about when a person has a new idea or competitive price (Grant, 2012).
a new product. Empowering workers to frequently
offer not beatable consumer experience. This  Service: The major objective of Virgin
strategy generates a huge value that consumers are Group is to provide high quality services
willing to pay a premium to have. and products through training effectively
their employees and conduct the technique
Value chain analysis for Virgin Group: of innovation, with follow up the feedback
Value chain analysis is a strategic analysis of consumers (Grant, 2012).
of a company that focused on the serial process of
value generating actions. The Virgin group's Supportive Activities:
generic value chain which identifies the actions  Firm infrastructure: Virgin is operating
that might be separated to present a further in in 25 countries with 300 companies in the
depth identification of the Virgin's actions. group, its owning many buildings, lands,
Michael porter's representation of the value chain plant and equipment, and Virgin gets
distinguishes between primary activities (those across a lot numbers of different
involved with the transformation of inputs and industries, such as financial services,
interface with the customers) and support industry of airline, music industry to the
activities (Grant and Jordan, 2012, 126). communication and computing services
(Grant, 2012).
Primary Activities:
 Inbound Logistics: In the organizations  Human Resource Management: Virgin
that present services, inbound and Group carries a successful brand name
outbound logistics refer to design, over 43 years due to the high skills,
solution, development and research (Dess experiences, intellect, talents of its
et al, 2010). Virgin actions with devoted to employees and their desire to outperform,
make sure of the services and raw with the unique culture of management
materials. Virgin works with suppliers on a style with minimal hierarchy and
high level, which has provided for many management levels. Besides, Branson
years, and thus cover the standard services gives primarily credit to the human
and products (Virgin, 2012). resources for the success of the company
(Grant, 2012).
 Operations: Virgin's product and services
are high quality. Besides, Virgin has  Technology Development: The quick
different websites for each activity that developments in digital technologies
offer different facilities to its consumers, created a whole new field of opportunity
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AFMJ 2016, 1, 56-67
 for Virgin. Virgin group is extremely “Megastores” and for this the suppliers would
admired for its innovative application of have the power to increase prices.
information technology to professionally
offer its services to the consumers (Grant, The threats of substitute:
2012). Virgin is offering different kinds of similar
products and services in comparison to other
 Procurement: Virgin stets its prices in the firms. Virgin improved their variety of services
right direction and obtains services and and products in Virgin Megastores to comprise
goods at cheaper costs, which allows mobile phones, cola, and music in order to
Virgin to keep consumers satisfied. increase sales. Which this is a threat of substitutes.
On train service there are always substitute, for
Porter Five Forces analysis for Virgin Group: example public transport such as flights for long
Porter’s Five Forces frame work help logically distance or coaches, and private vehicles.
evaluate potential stages of risk, opportunity, and However, in the Airway industry there is a
profitability depended on five components within minimal threat from the modes of transport on the
a venture. It is used as a tool to better grow a domestic routes due to relatively low prices.
strategic improvement over competing companies
within a business in a healthy and competitive Competitive rivalry:
environment. It is classified five forces that The Virgin group is a rapid development and
specify the long term profitability of a market globally economical company in recent years. For
(Porter, 1998). Virgin to continue their base in the markets, must
look into increasing their base in various markets.
The threat of entry: The virgin has a wide range of services and
Virgin involves many different services that are products flourishing in the market and
price-cut due to the economic downturn of the have sustained their strategy of low cost and
recession (Grant, 2012). Threat of new entry for usually attempted to generate a difference with
virgin train is very low, as it very accepted train their services. Therefore, the expansion of Virgin
operating company in the country. However, The doesn’t come from the competition with other
threat of entry in the airline industry is quite high. firms but an attempt to open new opportunities in
the business (Grant, 2012).
The bargaining power of buyer: The Virgin Group's success is based on the
In today's competition world, customers have to strategy of corporate parenting. Each new
be attracted in order to maximize the selling. business that the firm entered it well inherits the
Virgin group depending on Branson's innovative Virgin's brand name, the management style, value,
ideas with a good team around him, he was with access to the Virgin's resources and support
successful to provide all his products and services from the group. Virgin Group's Competitive
in competitively priced direct to the customers in advantages sustainability depends on way of
the world. For railway business, it’s not possible managing to support decentralization and Virgin's
to travel by public transport or private all the time, culture under a unified brand. As the brand name
therefore the passengers do not have much of is associated with Richard Branson the question
bargaining power because travel is a necessary arises whether it will have the same value for
requirement. customers after he leaves the business. To
generate sustainable competitive advantage the
The bargaining power of supplier: firm has to integrate its core competencies into
Virgin is an international business firm with internal processes and corporate culture (Grant,
a constant growth in rapid years. The major issues 2012).
for suppliers is the brand name reputation and Core competence according to Hamel and
Virgin as a brand has met their standards. Prahalad (1994) is a bundle of technologies,
However, Suppliers have the power to make resources, and skills that allow a firm to present a
decisions on whether to supply Virgin with a particular benefit to its clientele. Core
service or raw materials. The Virgin would need competencies are not a specific product, they
suppliers to transfer all Virgin produces to local contribute to the competitiveness of a range of
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services or products. Core competences are some On the other hand, Virgin's lack of focus
of the most significant sources of uniqueness, they and over-diversification which led Virgin to
are things that a firm can do uniquely well, and problems. For instance, strong competition in the
that no-one else can duplicate speedily sufficient industry of the airline, forced Virgin to sell Virgin
to influence competition. Most evident Virgin’s records to assist the airline continues to exist (The
core competencies are: strong brand name and Biography Channel, 2011). However, offering
reputation built by Branson, promotion and services in different businesses may provide the
considered advertising in ‘fun’ style. The success community the figure of being diversified and
of Virgin Group is standing on the corporate competitive. Virgin selects markets based on
parenting strategy, every new venture unit of entering institutionalised markets, particularly
business inherits the company’s brand name, those that do not provide value to services and
values, resources, management style, and support. products as well as do not have a lot of
To create sustainable competitive advantage competitors therefore Virgin can dominate it.
Virgin have to to incorporate its core competencies Virgin according to the case study followed the
into corporate culture and internal processes non related diversification, which mean that the
(Grant. 2012). However, customers desire the development of services and products beyond the
image that a brand name can bring but besides existing capabilities.
they require the value at a competitive price. The Management recruited in the Virgin
Branson has extended the basics of his brand in selected its workforce to be innovative individuals,
different ways that they are changed into a Basing on his image, Branson employed its
number of different activities. The Virgin group's managers in terms of personal characteristics.
reputation is directly related to Branson's They have the competitive streak in their
reputation. Consequently, if Branson falls down, personalities and they are pioneers in their field.
the virgin brand will also fall down. Virgin's employees have to able to share value and
Diversification refers to the expansion of to perform effectively as a group. Differentiation
an existing firm into another product line or field and innovation were the key emphasis by Virgin,
of operation ,which might be related or unrelated and the purpose was to provide more for less and
(Grant and Jordan, 2012). The Virgin Group that each venture was truly a Virgin in its own
decided to take on a related diversification of field for the facts that Virgin group is one of the
several firms spread across not related business. largest private company in the UK. While, Virgin
For a number of years Virgin Group successfully to keep away from damage to the Branson image
employ the diversification policy with more than and virgin brand, the group kept in operational
300 companies in the group. Moreover, it is some unprofitable businesses rather than declared
always looking for to invest profits from existing bankrupt or being sold. However, Virgin sold
goods and services in new markets. For example, some profitable businesses such as virgin record
such as starting Virgin its businesses from mail in order to invest in new business enterprise
record, airway industry, retails and other (Grant, 2012).
businesses. The rationale for the Virgin Group’s is to
Over expansion strategy was one of the diversify into different and as many as possible
key issues that facing Virgin throughout constant markets feasible, and expand its businesses at low
diversification. Virgin gets across a lot numbers of cost in terms can be relied upon to decrease
different industries, such as financial services, barriers to entry into fixed markets. The group
industry of airline, music industry to the aims to present better products and higher quality
communication and computing services. While services than other competitors in a complacent
unrelated industries, Virgin has made a way into market. The strategy that Virgin rely on it is the
each of the industries with reasonable and logical markets to be entered have to be still in its
success. Markets in which Virgin was able to growing phase.
successfully penetrate, tend to be common Virgin's strategy includes unrelated
characteristics, they are markets that usually have diversification at the individual business unit
been taken for consumers to take advantage of or level. Moreover, cooperatives are generated from
under-served, where there the competition is hierarchical relationships and the contact of the
uncertainty complacent. head office's company with individual business
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AFMJ 2016, 1, 56-67
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