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Richard Branson and the Virgin Group

Group case analysis
by

Lorenzo Gorga

on 30 March 2015

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Transcript of Richard Branson and the Virgin Group

Resources
tangible
intangible
human resources
financial
physical
technology
reputation
Value of each company
Stakes of companies
Royalties
Structure of the company
selling Virgin Records had generated money to invest in the airline (Finkle, 2011)
appreciation generate money (Financial Times, 2015)
120m dollar per year (Financial Times2015)
interest on debts from the lower levels of the company (Financial Times, 2015)
Registered in a tax heaven
holding company registered in Virgin British Island (Treciokas, 2014)
Copyright on the brand name “Virgin”
(Financial Times, 2015)
Start-ups with R&D (Innovation)
The group’s favoured start-up model relies on private investment for financing, with generally a co-investor sharing equity, and therefore the financial risk, often with a large amount of debt to the parent company loaded on to the balance sheet (Gordon, 2014)
Brand
1bn pound: value of Virgin brand (Financial Times, 2015)
In the eyes of customers the brand stands for value for money, quality, fun as well as a sense of competitive challenge (Rothacher, 2004)
Richard Branson
Branson himself is a key factor for the success of Virgin (Finkle,2011)
Branson is the embodiment of Virgin (Johnson, et al., 2014)
Network of contact and partners partners
(Treciokas, 2014)
Richard Branson experience
Employees loyalty
Independent managers
Childhood and experience with greenfield start-up since youth (Finkle, 2011)
delegation, incentives, fun, employees before everything (Finkle,2011)
protect people, create job, dealing fairly with people (TED, 2007)
Individual responsibility, enthusiasm and commitment (Treciokas, 2014)
(Treciokas, 2014)
(what?)
Customer loyalty
Easy identification of the brand in every different company (Rothacher, 2004)
Culture
High risk taking (MGM cinema, debt issue)
Anti-establishment (sex pistols incident, BA "dirty trick")
Fun/non-conformist (parties, publicity)
Large extended family - Employees and customer first (BA bonus, relocate staff)
Empowerment of the individual - "small is beautiful" (delegation and fragmentation of businesses)
(Rothacher, 2004)
VRIN model
Value
royalties are an evidence of the value of the brand and of the value given by the customers (Financial Times, 2015).
the structure of the company in layers neutralise threats, and generate money through interests (Financial Times, 2015).
the greenfield experience make Virgin able to managing new opportunities which provides potential competitive advantages (Treciokas, 2014).
Rare
Shared value are rare in the industries in which Virgin start new ventures. Most of them have a lack of customer care, quality and Innovation (Treciokas, 2014).
Inimitability
the link among competences is complex.
The culture of the company is very related with the core competences and with the shared values. (DMA, 2006).
the company is dynamic, always ready for new challenges and ventures (Finkle, 2011)
non substitutability
Customers are loyal to the brand and there is nothing similar (Rothacher, 2004).
INTERNAL
ANALYSIS
EXTERNAL
ANALYSIS
FIT
STRATEGY
Internal analysis of Virgin Airlines
resources
value chain
Capabilities
Entrepreneurship
Branson own capability in businesses (Finkle, 2011)
development of new managers in each company (Treciokas, 2014)
Communication
Branson skills in public relations(Treciokas, 2014)
Strong relationship with employees (Rothacher, 2004)
Marketing
everything became an opportunity for publicity, even the trial with BA (Treciokas, 2014)
Opportunities &
Venture capitalism
first shop after postal strike (Finkle, 2011)
new activities after deregulation (Treciokas, 2014)
exploring new fields (Treciokas, 2014)
venture capitalism (Prynce, 2015)
Broader vision
Branson own ability, developed in his experience (Finkle, 2014)
Core competences
Considering the whole Virgin Group we can find some core competences, a
linked set of skills, activities and resource
that, together, deliver costumer value and differentiate (Johnson, et al., 2014) almost every Virgin company from its competitors.
This core competences are needed to provide
competitive advantage
, not only the operational effectiveness (Porter, 1996).
Brand
Human resource
(how?)
Structure
(Venture capitalism & anti-establishment culture)
Culture
Shared value
(layers of holdings & indipendents companies)
Consistency on
shared values
Quality, customer care, value for money, innovation, competitive challenge, fun (DMA, 2006)
Different Strategies
The chief strategy for Virgin group was getting into already established sectors and creating the Blue Ocean in them by using competences.

Different strategies were adopted like:
An attempt to keep Virgin in the public eye, some are ‘anti-establishment’ and others about offering customers a better and more fun alternatives.
The Businesses might also be a method of training and developing managers.
The larger start-ups are serious strategic moves into new industries.
 (Treciokas, 2014)

Differentiation strategy
It involves uniqueness along some dimension that is sufficiently valued by customers to allow a price premium. (Johnson, et al., 2014:197)

With the cash , Branson did expansion of Virgin Airlines. New innovations on the airline included: onboard masseurs, fashion shows, and tailors. 

Virgin Group continued to embark upon numerous acquisitions and joint ventures which added more companies under the Virgin umbrella still with a non-related diversification strategy .


EXAMPLE
The launching for Virgin Brides and Virgin Trains in 1996 and
more recently the launching of Virgin Galactic (2004) and Virgin Fuel (2007).

These categories are indicative of non-related diversification, it was evident that Virgin was already recognizing particular industries/markets where it could expand and leverage its success. 

Entertainment
External analysis of Virgin Record
micro
macro
Finance
Shopping
Social and Environment
porter's 5 forces
Media and
Telecommunication
life cycle
Flights
Railways
PESTLE
Political
Economic
Social
Technological
Legal
Ecological
examples: environment of the music distribution industry in the early ’70 in which a postal service strike contributed to the idea of Branson first records shop (Finkle, 2011)
the "Virgin Prey"
Micro
Life cycle
The Virgin Prey is typically at the maturity stage, the products and service are standardised, the price tend to be the same, the entry barriers are high; therefore the nature of the competition is based on an oligopoly.
Porter’s 5(+3) forces
RIVALRY
ENTRANTS
SUPPLIERS
BUYERS
SUBSTITUTES
GLOBALISATION
DEREGULATION
DIGITALISATION
HIGH BARRIERS
(high fixed cost, patents required, difficult access to distribution, experience benefits, but legal restraints just eliminated )
LOW POWER
(not concentrated, products becoming differentiate, quality important).
STRONG FORCE
( multinational company)
LOW POWER
(difficult to offer similar service from an other industry)
HIGH POWER
(few suppliers, with long term relationship)
High
Low
High
Low
STRONG FORCE
(new laws promoting free competition in business)
oligopoly
Current Market share of the business
Growth Potential of the Business

Virgin Group
Macro
The typical PESTLE analysis of the Virgin Prey evidence a number of "change factors", usually political, economic, social or technological that allow the Virgin Group to enter in it and to take advantage of their core competences (such as brand, costumer care, innovation,…)
change factors:
Development of digital technologies.
The beginning of cellular communication & deregulation of the telecommunication sector.
Deregulation of railways
Deregulation of airlines
Financial crisis
Managing Strategic Capabilities
Internal Capability :

new ventures:
Online sales of music, cars, financial product, and wine.
Virgin Mobile.
Virgin Rail.
New route for airlines.
Virgin Money
Building and Recombining capabilities
- Creating entirely new capabilities that provide for competitive advantage.


Virgin's propensity to walk landscapes that were too risky for other more conservative labels was becoming legendary.
So he was unconventional.

Typical Industry attacked by Virgin is a red ocean, in which industries are defined and rivalry is intense, but in which a new factor have created a blue ocean, a new market space where competition is minimised (Johnson, et al., 2014)
Blue Ocean Thinking
Stretching Capability -
The opportunity to build new products or services out of existing
capabilities.

Virgin Atlantic opened the Virgin Club house at Heathrow and Virgin Fuels, an independent private equity firm investing growth capital in North America and Europe was launched.
W. Chan Kim: "You can create a blue ocean within a red one. In the airline industry, another good example is Virgin Atlantic Airways, which went for the high end market. Virgin redefined the travel experience for business and first-class travelers. It’s not just getting from airport A to B, but the experience you have from when you leave your home to when you arrive. So it includes ground transportation, and options like taking a shower on arrival instead of going to a hotel." (MindShare Consulting, n.d.)
External Capability :
Developing new capabilities by acquisitions or entering into alliances and joint ventures.

Virgin mobile UK and Virgin.net merged with NTL Telewest to create Virgin Media.
[Pelzer, 2013]
STRENGHTS
Strong Brand
Entrepreneurial leadership
Structure of the company (decentralised and independent companies)
Culture
WEAKNESSES
no core business
poor financial performance of some businesses
risk for brand from unsuccessful businesses
poor presence outside UK
dependence on Branson
5 C's
Coordination
- Delegating the leadership roles to others in the company, Branson would then have time on
his hand for seeking out new ventures and planning publicity opportunities for Virgin. 
 
Communication
- Within the organization, open communication between employees and management
is practised .
 
Command
- After only two years on the public market, Branson bought the outstanding shares and
brought Virgin Group back under private ownership.

Control
– After only two years on the public market, Branson bought the outstanding shares and brought
Virgin Group back under private ownership.
He wanted control over the organization.

Conflict
– There were no conflicts.


SWOT analysis (Finkle, 2011)
OPPORTUNITIES
synergies between businesses
International expansion
Focusing in growing markets
THREATS
negative impact on brand from brand licensing
maintaining the Virgin culture
brand dilution in the market place
retirement of Richard Branson
Boston Consulting Matrix (BCG Matrix):

Successful strategy execution depends on:

Doing a good job of working through others
- Delegating work to employees and making leaders.

Good organization building
- Branson attributed much of his success to the people around him.
Branson made it a priority to maintain a close, family-like organization.

Building competitive capabilities
- Branson's ability to inspire loyalty from people
And to see the broader vision.

Creating a strategy supportive culture
- Virgin's employees were high performing, fun, high energy people that
were continuously thinking outside the box and looking to innovate.

Getting things done/ Action oriented
- Branson enjoyed doing many things which was one reason why he had
been successful in so many areas.


Executing the Strategy (Primarily an operations-driven activity)
ROLE OF VIRGIN HEAD OFFICE
(Treciokas, 2014)
Strategic canvas
Richard Branson
Strategic leadership as the embodiment of strategy:
a founder or chief executive of an organisation may represent its strategy. This may be unintentional but can also be deliberate.
"Richard Branson no longer runs Virgin on a day-to-day basis, but he is seen as the embodiment of the Virgin strategy and is frequently the public face of the company."
(Johnson, et al., 2014)
"Ipsum sine timore, consector,"
“Screw it, let’s do it!” Branson J. (2013)
Strategic developments of the Virgin Group
from year 2008 till date

Virgin Money
sponsors the Virgin London Marathon ( Preston, J. 2010)
- launches Virgin Money Giving. (Richard Branson participated in the marathon, running the
marathon in 5 hours, in which he wore a pair of butterfly wings.)
Virgin Money US withdraws from the market ( Lepro,S.2010)
Virgin Digital
Help starts offering the US public technical support for all of their digital problems. 
Virgin Books
publishes Richard Branson’s fourth book ‘Reach For The Skies’
Notable Virgin Group companies’ events from 2010

Virgin Red Room
– a cross-platform music show – launches across various channels, including online, mobile, Facebook and Twitter. Stars from Jarvis Cocker to Justin Bieber take part. (Virgin website,2010)
Formula One racing team,
Virgin Racing
, debuts with Timo Glock and Lucas Di Grassi. (Virgin website,2010)
Virgin Gaming
– an online gaming service offering players cash, points and prizes playing in the comfort of their home – kicks off in the US. 
Virgin Produced
– a film and television development, packaging and production company based in LA – makes its debut with ‘Limitless’
Notable events continued…
Virgin Hotels
launches.(Virgin, n.d.)


Virgin Wines
expands to the US.


Virgin Megastores
in Australia cease to operate.


Virgin Active Singapore
(Saini,A.2013)


Virgin Radio International
launches a Calgary station.(virgin website,2010)


Virgin reveals
Project
, a digital magazine created exclusively for Apple iPad. (Glenday,J.2014)
Notable events continued…
-Risk-taking
-Optimism
-Irreverence / discourtesy
-Attracting publicity
Richard Brandson’s philosophy
The first boutique Virgin hotels chain –first one opened in Chicago 2nd week in January,2015.
Women-friendly hotels …the differentiation traits are:
- Good lighting along corridors
- Extra closet space
- Separate room for delivery
- Extra drawers
- Larger showers with a leg- shaving bench.
Boutique Virgin hotels
…on March 10,2015 the carrier announced that it had returned to the black after three consecutive years of losses. It reported a profit of 14.4m pounds( $ 21.7m) in 2014,compared with a 51m pounds loss the year before. ( B.R.,2015)
Virgin Atlantic Delta Force
this strategic move is to exploit an area that’s rarely commercialized. Sir Richard Branson has moved on to include a plan for the kids in his business empire- this will ensure that kids are in focus in the business; harnessing their futurist patronage. Nathan Helberg, founder of ZUU Chimps says. “I’m delighted to be bringing ZUU Chimps to the kids of the UK though Virgin Active, empowering kids through exercise is my real passion and Active Crew does just that.” It also teaches them skills for life which helps in developing balance, confidence and confidence in movement. This strategic move reflects the strategy of training and developing managers.

Virgin Active launches Active crew to help kids stay healthy ( Clarkson,2015)
Sir Richard Branson has ventured into space travel as he has seen a new opportunity to bring down the huge cost of the venture, which was primarily managed by the government, especially the Russian spacecraft until two private investors in the US; Elon Musk and Jeff Bezos set up the Blue origin and SpaceX. He has the financial support of the Aabar Investments, based in Abu Dhabi; this is almost 40% stake in Virgin Galactic and it signifies that the Middle East might want to build a major spaceport. (Wolfe A.,2013)
Sir Richard Branson plans to attract amateurs as astronauts, private citizens as passengers and has effected a huge cut in the chargeable fees ($250,000) with the hope of even effecting a downward review in cost of flight charged overtime. The venture has also encouraged a creation of scholarship for students studying technology, engineering, math, and science. It will also give wireless internet and telephone access to a lot more people and allow the measurements of weather patterns as the Virgin Galactic would someday transport satellites. (Wolfe A., 2013) This serious strategic move into new industry, is about offering potential customers a better and more fun alternative to getting to space putting their safety in mind.
Unfortunately, On October 31, 2014 the Virgin Galactic rocket crashed in California leading to the death of Michael Alsbury. Virgin is actively defending its adequate safeguards to the National Transportation safety board(NTSB) and European space agency, both organizations, who queried why Spaceshiptwo design allowed a-should-be- insignificant error of unlocking the feathering mechanism a few seconds early had caused a catastrophic crash.( Wright,R.(2014)
Space Travel by Virgin Galactic
Sir Richard Branson has been quoted in Atkinson, C. (2003) article thus; "In reality, having a bit of fun, not taking oneself too seriously and making a fool of oneself occasionally, has helped put Virgin on the map around the world and I'll continue to do that until we've got someone else who can do it better." But, he says with a laugh, there's no search on for a successor. "I'll probably have to be around another 50 years."
Succession plans
UPDATES
All the operating companies operate on a standalone basis and were financed as such. He is a venture capitalist, who backs a new business venture if it creates an opportunity for restructuring a market and creating competitive advantage. A beneficial interaction with all other Virgin business ventures is also a good consideration.
MISSION STATEMENT
New businesses where based on the whim of Sir Richard Branson or pure opportunism!!!Deregulation helped his group businesses a lot simple examples are;
Deregulation of the telecommunications sector(UK) brought about Virgin mobile
Deregulation of the railways (UK)help brought about Virgin rail
Deregulation in Australia and Nigeria brought about low-cost airlines
(Finkle, 2014)
(N.B., 2015)
REFERENCES LIST:
Richard Branson and the Virgin Group
Group case analysis presentation
Ankit Metha


Lorenzo Gorga


Opeyemi Omole


Rahul Dhuppad


Rahul Kumar

(Pryce, 2015)
(Pryce, 2015)
Thanks for your attention
(Employees & managers development)
(Quality, customer care, value for money, innovation, competitive challenge, fun)
(recognisable by customers)
General high attractiveness
(Good examples are the strategic business of airlines, trains, mobile, money...)
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[Accessed 03 2015].
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[Accessed 03 2015].
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[Accessed 03 2015].
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Available at:
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"Every day that Richard Branson gets older the issue of the Virgin brand becames a bigger one because so much of it, is tried to him" says Jez Frampton, Chief executive of Interbrand, the brand consultancy.
However, Sir Richard, 64, has redirected his energy from the daily management routines of Virgin Group holdings to more of his charitable activities and space tourism since year 2005 (Gordon, 2014).
Full transcript