LONGITUDINAL STRATEGIC DEVELOPMENT STUDY RECENT PAST INTRODUCTION Virgin Group limited is a venture capital conglomerate founded in 1970 by Sir Richard Branson with interest in transportation, travel, mobile, financial services, media, music and fitness. It employs about 50,000 people in more than 30 countries, comprising of 300 companies and brand, with 11. 5 billion pounds in revenue as at 2009, (Virgin website). (Adapted from Rob Abdul, 2001) It started as a mail order business and gradually moved in retailing and publishing.
In 1986 Virgin was listed on the exchange, Branson soon got tired of the bureaucratic dealings associated with a public listed company and took back ownership of the company. The virgin group is run in a loose structure manner usually run by self-managed team that uses the brand name. He also had a philosophy that spins off new unit if a company got too big. Branson manages the group with assistant from trust aides that have been with him for years. Virgin lends its brand name to businesses it thinks it can make a difference. It had five criteria of which four of them must be met.
These criteria include innovation, challenge authority, value for money, quality and a growing market and value was added based on a Branson belief that the brand was the most important asset of the business, (esecourses. com). Branson early traits form his beginnings revealed certain features that would guide his business philosophy in later years his nonconformist attitude and the use of friends and acquaintances to run his first venture, the student magazine. The businesses in the Virgin Group: VIRGIN ATLANTIC AIRWAYS: Branson was talked into founding a low cost transatlantic with a U.
S Businessman, he went along with the plan against the advice of his executives in virgin record who thought of the proposal as too much of a risk since it was an unknown territory that involved negotiating with government, airports, banks and aircraft manufacturers and also the fact that failed airlines business littered everywhere. This new territory caused the first major shift in the strategic thinking of Virgin as the airline was capital intensive and by 1985 airfares price war and the investment needs of virgin Atlantic (the airline) had taken its toll on Virgin finances with the result that publicly listed to raise more equity.
Virgin’s music, retail, and vision business was brought together to form the Virgin Group and 35% of its equity was listed. Branson was not happy with this new arrangement because of the control that shareholders would hold on direction and this was not in keeping with his nonconformist style and also that he felt that his organization was misunderstood and undervalued by so called experts. The organization culture at Virgin was also at risk in this new arrangement and he seized the opportunity presented by the 1987 stock market crash to buy out external shareholders.
Back in private hands Virgin continued to grow using funds realized from Virgin Atlantic and loans to seek out new market around the globe with the Virgin megastore in such diverse countries like United States, Netherlands, Japan, Spain and Australia using joint venture strategy with Blockbuster Corporation. The 1990s saw similar expansion with the launch of Virgin Lightships, West One Television, Virgin games, Vintage Airtours, Virgin Euromagnetics. Old units like Virgin Atlantic continued to expand covering twenty cities including Hong Kong and Tokyo.
It is pertinent to note here that Virgin Atlantic has won numerous customer service award. The expansion of Virgin and the increasing pressure on cash led to another shift in strategy this time rather than go public again, it was decided that a joint venture would suit the present time and this strategy was pursued aggressively. Eventually Virgin music was sold off as making a dramatic shift from the entertainment industry to travel and airlines. The launching of new businesses eventually led Branson to return to selling off equity stakes. 9% of Virgin Atlantic stakes were sold. By the middle of the last decade Virgin companies now comprised of several holdings companies and over 200 operating company. Using Virgin Atlantic as an example of how Virgin differentiates its businesses from others to give it a competitive edge. Virgin customers enjoys such privileges that other passengers don’t even get in first class having hair stylist and massages in-flight and personal controlled passenger screen. VIRGIN RECORDS This was a mail order business which later grew to a record company where he igned artist that was not appealing to the main stream music labels and even though suffered some setback during the 1979 to 1982 recession the company soon turned around and was soon making a lot of profit. VIRGIN CARGO As Virgin Atlantic was still in the infancy stage of planning Branson thought of taking advantage of the freight service and by the 2000 it was handling about 100,000 metrics tons per year, even going to the extent of managing freight for other airlines and organization.
Part of the reason for the success is the free hand he gave executive to run the freight, fitting into the organizational culture of Virgin. Virgin Rail This was the a high risk venture undertaken by virgin as there was no previous knowledge and it was capital intensive. Several years later Virgin was operating two rail services Virgin Cross-Country and Virgin west coast in addition Virgin was also one of the investors responsible for running the Eurostar. The rail was only marginally successful relying on government subsidies and eventually selling out stakes.
VIRGIN TRADING GROUPS A beverage subsidiary which produced Virgin whiskeys, Virgin Cola despite heavy marketing and investments it never went beyond 8% of the market shares. VIRGIN MONEY It offered retirement, insurance plan as well as other financial services using a low cost strategy and introducing convenient all in one packages. This venture was relatively successful but despite this it continued to lose money and its 25% stake was sold but when AMP which owned a 50% stake in business was seeking a divestment Virgin money bought its equity.
VIRGIN CORPORATION Clothing, cosmetics, toiletries and high designers wears which was not very successful with share declining a full 52 points VIRGIN NET A joint venture between virgin and a group of partners offering internet services and other contents using a low cost strategy to gain a competitive edge over rivals. It was one of the more successful Virgin run businesses. VIRGIN MOBILE Mobile telephone run in partnership with other network. It was successful due to the name recognition of virgin and product mix offered by Virgin.
It required no monthly contract and its prices were low as a result it was popular among teenagers. They success was replicated in Australia and the United States with relative success but failed in Singapore. Virgin Bride An elaborate bridal shop which sought to fill an unmet need for all things wedding in the same roof. This strategy was used by Virgin during its first 30 years to gain wide name recognition, this coupled with the flamboyance of the owner Richard Branson helped Virgin products to rival established firms like British Airways, British Telecommunication and other mobile networks in the market.
In a nutshell on the balance Virgin could be said to have been a success right from its inception, (Grant R. 2004). CURRENT STRATEGIC SITUATION Virgin present strategies had been basically shaped by the past and the risk taking organizational culture favored by Branson; it has been shaped though by the present environment and rivals strength. Using Virgin Atlantic Airways for our analysis of how Virgin operates: (Shreshtha A. 2010 ) •Porter’s five-force Analysis (Lauren, 2011)