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Story of Vigin Group

Story of Vigin Group

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Published by Kamal Kant Chauhan

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Published by: Kamal Kant Chauhan on Jul 13, 2011
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Virgin Group
Address:
120 Campden Hill RoadLondon W8 7ARUnited Kingdom
Telephone:
(0171) 229-1282
Fax:
(0171) 727-8200http://www.virgin.com
Statistics:Private Company
 
Founded:
1973 as Virgin Records
Employees:
24,000
Sales:
£3 billion (US$5 billion) (1999 est.)
NAIC:
312111 Soft Drink Manufacturing; 446120 Cosmetics, Beauty Supplies, and Perfume Stores;451220 Prerecorded Tape, Compact Disc, and Record Stores; 453998 All Other Miscellaneous StoreRetailers (Except Tobacco Stores); 454110 Electronic Shopping and Mail-Order Houses; 481111Scheduled Passenger Air Transportation; 482111 Line-Haul Railroads; 511130 Book Publishers; 512131Motion Picture Theaters (Except Drive-Ins); 512220 Integrated Record Production/Distribution; 512230Music Publishers; 513112 Radio Stations; 514191 On-Line Information Services; 523999 MiscellaneousFinancial Investment Activities; 524113 Direct Life Insurance Carriers; 551112 Offices of Other HoldingCompanies; 561520 Tour Operators; 721110 Hotels (Except Casino Hotels) and Motels
Company Perspectives:
 
'Virgin is about doing things that really work, not just looking the part. We are passionate aboutrunning our businesses as well as we can, which means treating our customers with respect, givingthem good value and high quality and making the whole process as much fun as it can be.' --RichardBranson, Chairman
ey Dates:
 
1968
:
Richard Branson produces the first issue of
Student
magazine.
1970
:
Branson forms a firm called Virgin, which begins as a mail-order record company.
1973
:
Branson forms record label Virgin Records.
1977
:
Virgin Records signs the Sex Pistols to a recording contract.
1984
:
Virgin Atlantic Airways is founded; first hotel interest is acquired.
1985
:
Virgin Holidays, a tour operator, is formed; Virgin Group is created.
1986
:
Virgin Group PLC is taken public through a $56 million stock offering.
1988
:
Virgin Group is taken private again through a management buyout; first Virgin Megastore isopened in Sydney, Australia.
1991
:
Virgin Publishing is formed; Virgin Group generates estimated sales of more than $2 billion.
1992
:
Virgin Records is sold to Thorn EMI plc for £510 million (US$957 million).
1993
:
Virgin Radio, the first national commercial rock station in the United Kingdom, is launched;Virgin Atlantic wins libel settlement of £610,000 from British Airways relating to 'dirty tricks'campaign.
1994
:
Company enters the soda market with the formation of Virgin Cola Company Ltd.
 
1995
:
Virgin Direct is created, representing the group's entrance into financial services.
1996
:
Euro Belgian Airlines, a low-cost, short-haul airline, is acquired and renamed Virgin Express.
1997
:
Virgin Rail Group is formed, following the acquisition of two aging, poorly maintained rail lines.
Company History:
 
Virgin Group is a diversified grouping of more than 200 privately held companies. The largest of theseare Virgin Atlantic Airways, the number two airline in the United Kingdom; Virgin Holidays, a vacationtour operator; Virgin Rail, the second largest U.K. train operator; the Virgin Retail Group, whichoperates numerous Virgin Megastores, a retail concept featuring videos, music CDs, and computergames; and Virgin Direct, which offers financial services. Other Virgin businesses include beveragemaker Virgin Cola, a record label, book and music publishing operations, hotels, an Internet serviceprovider, movie theaters, a radio station, cosmetics and bridal retailing concepts, and a line ofclothing. Holding this disparate group of companies together is the combination of Richard Branson andthe Virgin brand name. British entrepreneur Branson dropped out of boarding school at the age of 17,in 1967, to start his own magazine. That venture was an immediate success, establishing thefoundation for what would become a multibillion-dollar conglomerate during the 1990s. Along the way,Branson would attain cult status in his home country--the result of his business exploits, quests foradventure, and unique personal style. The Virgin brand had meantime become, according to thecompany, one of the top 50 brands in the world by the late 1990s; a poll of British consumers at thattime showed that 96 percent had heard of Virgin.
 
Pre-Virgin Undertakings
 Branson's entrepreneurial bent emerged during his childhood. 'The fact that we never had any moneywas a very good thing,' explained Branson's mother, Eve, in the November 1987 issue of
I
nc.
EveBranson went on to suggest that her son 'wanted to help the family.' A friend cited Branson's love forsports and competition as another major ingredient of his success; 'He likes playing the game for thesake of playing the game. He competes hard because he enjoys the competition,' noted Simon Draperin the
 
I
nc.
article.Although Branson loved sports as a youngster, he was forced to rechannel that energy following aserious knee injury. He decided, instead, to focus on establishing a business. Branson embarked on hisfirst venture, in fact, when he was around 11 years old, planting 1,000 seedlings, which he hoped toeventually sell as Christmas trees. When rabbits ate the seedlings, Branson tried a different scheme ayear later. His plan this time was to breed and sell a type of small, highly reproductive parrot. Thateffort fell through when, according to Branson, rats ate the parrots; Branson's mother, however,contended that she released the birds.Branson was undaunted by early failures. With the same enthusiasm that would characterize his entryinto new endeavors as an adult, he initiated his first major success at the age of 15 when he started amagazine called
Student.
His parents reportedly were under the impression that Branson had beenworking on a simple school newspaper, but they learned that he intended to launch a magazine for thegeneral public after he traveled to London to sell advertising space. Branson's father, Edward, had hisdoubts, but he did not want to quash his son's excitement. Besides, Edward reasoned, Richard only had£100 (about US$150) to his name, and it would be good for him to learn a lesson about the difficulty ofmaking it on his own.
From Record Seller to Record Label:
1970
-
83
 To the surprise of his parents, Branson sold 50,000 copies of the first issue of
Student,
which wasproduced in January 1968. In fact, the venture was so successful that Branson dropped out of schoolwhen he was 17 to run his business full time. Soon thereafter, in 1970, he launched his second majorundertaking, a company called Virgin. Virgin started out as a mail-order record company. A new lawhad just been passed that allowed people to sell records at discounted prices, and Branson was amongthe first to take advantage. Like his magazine, Branson's new company was an immediate success. Salesskyrocketed, and Branson scrambled to find workers to keep up with the tremendous order load. Whena postal strike crushed the mail-order endeavor, the resilient Branson responded by changing hisstrategy. In 1971 he opened a small, discount record shop that was also a hit. A string of Virgin Recordstores followed.
 
Early setbacks, such as the postal strike, were representative of the great obstacles that Branson wouldbe forced to overcome in Britain's antibusiness climate of the 1970s and even 1980s. Indeed, during the1970s the country was mired in economic malaise. Tax rates on unearned income were as high as 98percent, and labor strikes such as the one that nearly destroyed Virgin were the norm. Furthermore, ageneral disdain for entrepreneurs and 'new money' permeated the business and social environment,making it more difficult for would-be capitalists to get their ideas off the ground. A mid-1980s survey,for example, showed that 29 percent of the executives in the United Kingdom viewed business ownersas having the lowest status in the country, while only 13 percent thought they had the highest status.Nevertheless, Britain's political, social, and economic environments were perfect for Branson; a rebelby nature, he loved a good challenge and enjoyed bucking convention. That characteristic was mostconspicuously evidenced by the name that he chose for his company. He used Virgin to signify his lackof knowledge about the businesses into which he entered. While convention demanded thatentrepreneurs have experience in the ventures they began, Branson elected to enter businesses thatinterested him, regardless of his background; he would ask questions and invent his own route tosuccess. Having no preconceived ideas about an industry, he was able to identify unnecessary hurdlesthat his competitors took for granted, as well as to recognize hidden opportunities.Branson demonstrated his unique style again when he entered the recording business in 1973. By then,the 23-year-old entrepreneur was becoming bored with his publishing and record store endeavors. Still,he was fascinated by the recording business and wanted to take a crack at running his own studio.Snubbed by the British financial establishment, Branson was able to get friends and relatives tocontribute start-up capital for the project. The first act he signed was an unknown artist named MikeOldfield. They cut a unique album, Virgin Record's first, titled
Tubular Bells.
The record sold fivemillion copies, became one of the biggest selling albums of the decade, and was used as the soundtrackfor the movie blockbuster
The Exorcist.
 While Branson enjoyed success with Virgin Records during the mid-1970s, by the end of the decade thecompany was trying to shake its image as an outmoded 'hippie' label. To that end, Branson signed apopular band known as the Sex Pistols. A crude, irreverent, hard-core punk band with a flair for theobscene, the Sex Pistols had become popular during the mid-1970s and were credited with spawningthe entire hard-core punk movement. Branson had tried unsuccessfully to sign the band before. Then,in 1976, the Pistols were dumped by the company that held their recording contract, following aparticularly offensive display by the band on national television.Although another company was quick to sign the Pistols, within hours of signing that contract the bandtrashed that firm's offices and found themselves once again in need of a sponsor. Then, in 1977,Branson moved in to sign a band that would bring the youth market back to Virgin with a vengeance.Under Virgin, the Pistols continued to shock the world--some of their songs were even banned by theBritish Broadcasting Company (BBC)--and thereby helped Virgin achieve notoriety in the industry. Moreimportantly, though, the Pistols attracted other major talent to Virgin's studios. Steve Winwood, BoyGeorge, Phil Collins, Genesis, and the Rolling Stones all signed onto the Virgin roster.
Virgin Atlantic and Other Risky Endeavors:
1984
-
89
 Branson's burgeoning operations prospered during the early 1980s. Still, the entrepreneur was restlessand continued to seek new opportunities. In 1984 he came across another industry that interested himand about which he knew relatively little: the airline industry. Critics effectively laughed off Branson'sproposal to begin providing long-haul air service between the United States and London. Nevertheless,he purchased a Boeing 747 and began flying people back and forth between London and New Jersey,offering improved service and unique features. Virgin Atlantic Airways wowed observers by posting aprofit in its second year. 'It's not so divorced from the music business,' Branson pointed out in theNovember 14, 1988,
Forbes,
noting that 'if people are traveling for ten hours, they want to beentertained.'Entertainment was, indeed, an important element of Virgin Atlantic's success during the 1980s andearly 1990s. Passengers were entertained with videos and, in some cases, live performances frommimes or musicians such as cellist Julian Lloyd Webber. In addition, first-class travelers enjoyed suchperks as roundtrip limousine service to and from the airport. Furthermore, Branson kept expenses lowby growing his airline slowly and focusing on low costs and high profit margins. By 1988, the airlineconsisted of only two planes, but was boasting the highest occupancy rate and greatest profit margins

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