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Introduction The Virgin Group is one of the UK's largest private companies, with an annual turnover estimated at £3bn per annum by 2000. Virgin's highest-profile business was Virgin Atlantic, which had developed to be a major force in the international airline business. However, the group spanned over 200 businesses from financial services through to railways; from entertainment mega stores and soft drinks to cosmetics and condoms. (Figure 1 shows the breadth of the group's activities.) Its name was instantly recognizable. Research showed that the Virgin name was associated with words such as 'fun', 'innovative', 'daring' and 'successful'. The personal image and personality of the founder, Richard Branson, were high profile; in British advertisements for Apple Computers, together with Einstein and Gandhi, he was featured as a 'shaper of the 20th century'.
Origins and ownership Virgin was founded in 1970 as a mail order record business and developed as a private company in music publishing and retailing. In 1986 the company was floated on the stock exchange with a turnover of £250 million. However, Branson became tired of the public listing obligations. Compliance with the rules governing public limited companies and reporting to shareholders were expensive and time-consuming, and he resented making presentations in the City to people whom, he believed, did not understand the business. The pressure to create short-term profit, especially as the share price began to fall, was the final straw: Branson decided to take the business back into private ownership and the shares were bought back at the original offer price, which valued the company at £240 million. Virgin had grown fast, becoming profitable and entering and claiming a significant share of new markets without the traditional trappings of the typical multinational. There was little sense of management hierarchy and there seemed to be a minimum of corporate bureaucracy. There was no 'group' as such; financial results were not consolidated either for external examination or, so Virgin claimed, for internal use. Its financial operations were managed from Geneva.
The approach to management was one that decentralized decision making. Senior staff had often had successful careers in large. The advantage of a private conglomerate was that the owners can ignore short-term objectives and concentrate on long-term profits. Indeed. he would rather sacrifice short-term profits for long-term growth and the capital value of the various businesses. which must keep shareholders. Others argued that financing purely through equity slowed the group's ability to expand. as Virgin almost wholly comprised private companies. free from investors' fixation with short-term returns. multinational corporations. Historically. stakeholders and analysts happy. In 2000 the head office consisted of about 30 people. Branson's philosophy was that if a business got to a certain size. he would spin off a new business from the existing one. and unavailability of consolidated accounts.Each business or group of businesses ran its own affairs but they were tied together through a degree of shared ownership and shared values. many of whom had stayed with him for more than twenty years. The Group has been described as a 'keiretsu' organization . Due to its status as a private company. Some argued that Virgin's ownership structure enabled it to take long-term views. Branson has argued that. as he expanded. and must pay attention to short-term goals of high taxable profits and healthy dividends. With businesses scattered across a wide range of industries and . it was difficult to arrive at accurate figures for the Group's collective turnover and profit. Branson argued that. Still others suggested that the complex web of businesses. the running of the Group must be fundamentally different from that of a public limited company. the Virgin Group had been controlled mainly by Branson and his trusted lieutenants. Companies within the group did not even share a common accounting year-end. with ownership in offshore trusts in the Channel Islands and the British Virgin Islands. Corporate structure The structure of Virgin Group was so opaque that the true financial position of Virgin Group was unclear. did little to support Branson's image of honesty and openness. with an emphasis on autonomous business-level decision making and responsibility for their own development.a structure of loosely linked autonomous units run by self-managed teams that use a family brand name. reinvesting for this purpose. the complex group structure.
Good prospects would be those that . Virgin had taken on one established industry after another. But this was underpinned by their public relations and marketing skills. and until he was needed to finalize big deals or to settle strategy. The Virgin brand was the single most important asset of the company. I am now juggling bigger deals instead of the banks. However. It is only a matter of scale. it was about being the consumer's champion. with about four new projects under discussion at any one time. it was thoroughly researched to decide whether Virgin could offer something truly different: the aim being to extend the brand name at a low cost into selected areas where its reputation could be used to shake up a relatively static market. and their experience with greenfield start-ups. Branson has insisted that their core values and approach have remained the same. and Virgin did well when it identified complacency in the marketplace and offered more for less.markets. in an effort to shake up 'fat and complacent business sectors'.' Corporate rational Whilst the diversity of Virgin's business interests has been questioned. from British Airways to Coca-Cola and railways. However. when it came to marketing and promotion. Virgin saw an 'institutionalized' market as one dominated by few competitors. the approach was hands-off. be good quality. The name Virgin was chosen to represent the idea of the company being a virgin in every business they enter. before entering a new market. Branson would take a more involved role. Virgin would only put its name to a project if it met four out of five criteria: it must be innovative. challenge authority. Based on a set of attributes and values rather than a market sector. Branson and his business development team reviewed about 50 business proposals a week. The Virgin brand made it possible to overcome barriers to entry in various industries and sectors. Branson ruled with a loose rein by delegating to managers and giving them leeway to use their initiative. Virgin's understanding of the opportunities presented by 'institutionalized' markets. and the market must be growing. Branson's method of adding value to businesses revolved around four main elements. And when it came to the financing of the group and its deals. offer value for money by being better than the competitors. Branson's operating style was expressed in his autobiography: 'In the early 1970s I spent my time juggling different banks and suppliers and creditors in order to play one off against the other and stay solvent. not giving good value to customers because they had become either inefficient or preoccupied with each other.
want to be the best at whatever they do. whilst its partner. bonuses and profit sharing. Although it did not operate its own network. The carriers' competences lay in network management. fitted the Virgin brand. Branson adopted his own personal style of management. could respond to the Virgin method of treatment. Virgin won an award for the best wireless operator in the UK. Virgin built a business in the wireless industry by forming partnerships with existing operators to sell mobile services under the Virgin brand name. invested £20m. but employees were still held accountable for their performance.addressed institutionalized markets. Virgin Group's move into clothing and cosmetics required an initial outlay of only £1. offered an enticing reward-to-risk ratio. Within the business units. This internalization of corporate values meant a greatly reduced need for external controls. there was promotion from within. priding himself on actively involving employees and seeking their ideas on ways of further adding value to his customers. and with a strong desire to beat the competition. Some have described the Virgin Group as a branded venture capital house. .000. ploughed £450m into the joint venture. Employees were expected to internalize values and behave accordingly. no monthly fees and cheaper prepaid offerings. and could be represented by a capable management team. not branding. Organizational participants must share certain values specific to the Group and everyone was expected to be familiar with the corporate culture. Management style Branson has sought out people with innovative ideas who are willing to start new businesses. Each business was 'ring-fenced'. Virgin's expansion into new markets had been through a series of joint ventures whereby Virgin provided the brand and its partner provided the majority of capital. with the use of partners providing flexibility and limiting risk. With Virgin Mobile. Virgin's stake in Virgin Direct required an initial outlay of only £15m. Victory Corporation. Virgin set out to differentiate itself by offering innovative services such as no line rentals. Human resource management systems were in place to keep people committed by stock options. For example. even if that company -went bankrupt. whilst its equal partner. and wherever possible. so that lenders to one company had no rights over the assets of another. AMP.
Virgin Cinema. Virgin Direct Banking reported losses of £20. In 1999. Virgin Cola and Virgin Clothing all made losses. Virgin appeared to be highly dependent on the profits of Virgin Atlantic. There were other costs too. There were also few other businesses making substantial profits and many seemed to be operating at a loss. Selling chunks of some businesses to fund new and existing businesses had become a familiar story at Virgin . sold a 49 per cent stake in Virgin Atlantic to Singapore Airlines. It was cited as one of the most unpopular and inefficient train operators in Britain.they sold off their UK and Irish cinema houses. Another concern was whether Virgin had become purely an endorsement brand. and the Virgin brand. and in 2001 were seeking buyers for Virgin Sun and Virgin Express. rather than one that could offer real expertise to the businesses with whom it was associated. this was troubling as the airline industry was cyclical and facing increased competition as a result of deregulation. was to be found in just a few duty-free shops and on Virgin Atlantic flights. Virgin Vodka.9 million to £220 million in 2012.4m. Critics also argued that Branson's foray into so many diverse products and services could dilute the strength of the brand. Government subsidies would decline up to 2002 from around £77 million in 1998 and it •would be necessary for Virgin to be paying the UK government annual franchise fees rising from £3. sold Virgin Music. arguably .Challenges for Future By 2001 commentators had a number of concerns. Virgin Clothing. launched in 1994. Branson finally folded his UK clothing line. It was estimated that Virgin needed to double the number of passengers to be a success and spend £750 million on new rolling stock and service improvements. with complaints that the service was worse than it had been prior to privatization. did nothing to help this situation. there was also a risk he could undermine Virgin's value if some of his high-publicity ventures failed spectacularly. For example. Because Branson was so closely linked to the Virgin brand. In 2000. The most public problem -was Virgin Rail. both Virgin Express and Virgin Sun had reported continuous losses since their inception. following rail disasters and the consequent national disruption to rail traffic as a result of emergency upgrading of track. whose Cross Country and West Coast lines were ranked 23rd and 24th out of 25 train operating franchises according to the Strategic Rail Authority's Review in 2000. The loss of rail passengers in 2001.
its most precious asset. At the end of 2000. even failure. Branson was struck a blow when his People's Lottery consortium failed in their bid to run the UK National Lottery and Virgin Rail failed to win the East Coast main line franchise. could become associated with major problems. Fig1: Virgin Group The Virgin Group Virgin Travel Virgin Rail Virgin Cinemas Virgin Media Virgin Hotels Virgin Group Virgin Music Virgin Trading Virgin Atlantic Virgin Holidays Virgin Aviation Virgin Balloon Virgin Rail Virgin Cinemas Virgin Publishing Virgin Hotels Virgin Hotels Mktg Virgin Direct Virgin Net Virgin Money Virgin Mobile Telecoms Virgin Records Virgin Radio EMI Virgin Music Virgin Digital Studious Virgin Megastores Virgin Enterprises Virgin Clubs Virgin Cosmetics .
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