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1 Introduction 1.1 2 2.1 2.2 2.3 3 4 5 Company Introduction Industry External Factor Analysis PEST Analysis Porter’s Five Force Model Analysis Threats and Opportunities Conclusions Suggestions to Future Strategic Management Bibliography and References
1 Company Introduction Virgin is a leading branded venture capital organization and is one of the world's most recognized and respected brands. Conceived in 1970 by Sir Richard Branson, the Virgin Group has gone on to grow very successful businesses in sectors ranging from mobile telephony to transportation, travel, financial services, media, music and fitness. Virgin has created more than 300 branded companies worldwide, employing approximately 50,000 people, in 30 countries. Global branded revenues in 2009 exceeded £11.5 billion (approx. US$18 billion). Virgin believes in making a difference. Virgin stands for value for money, quality, innovation, fun and a sense of competitive challenge. Delivering a quality service by empowering our employees facilitate and monitor customer feedback to continually improve the customer's experience through innovation has been the main objective. During a start of any new venture, we base it on hard research and analysis. Typically, we review the industry and put ourselves in the customer's shoes to see what could make it better. The fundamental questions that arise for an entrepreneur who seeks an opportunity: is this an opportunity for restructuring a market and creating competitive advantage? What are the competitors doing? Is the customer confused or badly served? Is this an opportunity for building the Virgin brand? Can we add value? Will it interact with our other businesses? Is there an appropriate trade-off between risk and reward? We are also able to draw on talented people from throughout the Group. New ventures are often steered by people seconded from other parts of Virgin, who
bring with them the trademark management style, skills and experience. We frequently create partnerships with others to combine industry specific skills, knowledge, and operational expertise. Contrary to what some people may think, our constantly expanding and eclectic empire is neither random nor reckless. Each successive venture demonstrates our devotion to picking the right market and the right opportunity. The more important factor for an entrepreneur is to diversify the business in order to mitigate or rather minimize the risks involved in the business. Once a Virgin company is up and running, several factors contribute to making it a success. The power of the Virgin name; Richard Branson's personal reputation; our unrivalled network of friends, contacts and partners; the Virgin management style; the way talent is empowered to flourish within the group. To some traditionalists, these may not seem hard headed enough. To them, the fact that Virgin has minimal management layers, no bureaucracy, a tiny board and no massive global HQ is an anathema. But it works for us! The proof of our success is real and tangible. The company is a part of a family rather than a hierarchy. They are empowered to run their own affairs, yet the companies help one another, and solutions to problems often come from within the Group somewhere. In a sense we are a commonwealth, with shared ideas, values, interests and goals.
2 Industry External Factors External factors are those factors that are not in the hands of the organization. These factors may be dealt with little analysis, models which will help these factors are defined in a much better way. Below I will analyze the external factors of Virgin with PEST model and then use the Porter’s Five Force model and the external factors-Opportunity and Threats of SWOT model.
2.1 PEST ANALYSIS PEST is an acronym for Political, Economic, Social and Technological factors, which are used to assess the market for a business or organizational unit. The PEST analysis is a useful tool for understanding market growth or decline, and as such the position, potential and direction for a business. A PEST analysis is a business measurement tool. 2.1.1Political Analysis Virgin is a leading branded venture capital organization and is one of the world's most recognized and respected brands. Conceived in 1970 by Sir Richard Branson, the Virgin Group has gone on to grow very successful businesses in sectors ranging from mobile telephony to transportation, travel, financial services, media, music and fitness. The brand is used in many countries of the world. They have businesses in 30 different countries be it the best countries in
the world with outstanding quality of life, having the healthiest economies in the world all of them have accepted the brand as a whole. However, since Virgin may start to spread its business to some other parts the world, it has to take challenges from political factors in other countries.
2.1.2 Economic Analysis After the financial crisis in 2008-09, the global economy has started to recover. People now are affordable to consume better services. The important thing what Virgin have done is diversifying their business to minimise the risk. What the Virgin has to look out for are their competitors in their market, as there are many offering the same service for better prices and Virgin have to strategise their approach towards pricing their services and products. However, with the recovering of the global economy and with the businesses flourishing in different countries they will share the global growth with Virgin as well as other brands.
2.1.3 Social Analysis As we know, purchase behaviour and consumer demand is largely driven by cultural norms, so companies in a foreign country with different cultures, lifestyle trends, customer attitudes and opinions choosing a product will be a challenge. The company needs to concentrate on their advertising,
publicity, media laws and laws changes that don’t affect the social factors. The brand, company and technology image plays an important role on the social factors of the consumers in regards to buying the product and also the company must have a deep understanding of cultural differences and religious factors of the consumers.
2.1.4 Technological Analysis The usage of modern technology is very important in this business. The company needs to invest in the research in order to have a potential development in the innovating a mature technology. The performance of the company relates to their technology legislation, technology access, licensing and patent rights that the company possess. However, Virgin could put new elements of technologies into its development thus keep up with the world.
2.2 Porter’s Five Force Model Analysis Michael Porter's famous Five Forces of Competitive Position model provides a simple perspective for assessing and analysing the competitive strength and position of a corporation or business organization. 2.2.1 Existing competitive rivalry from suppliers Today Virgin to some extent is a large and globally economical company with a rapid development in recent years. For Virgin to maintain their base in the markets, have to look into expanding their base in different markets. Actually
what matters sometimes is the industry size and Virgin as an industry has lived up to their standards. They have a wide range of products and services flourishing in the market and have maintained their low cost strategy and always tried to create a difference with their products. So, the growth of Virgin doesn’t come from the competition with other companies but try to open new opportunities in the industry.
2.2.2 Threat of new market entrants In the telecom, travel and other industries the employees should be skilled and try to pace themselves with the current market situations. As for Virgin they have placed themselves well in over 30 different countries and with the expectations of expanding to other markets will pose a threat to the existing market holders. However, with the expertise of the experts and skilled and experienced employees Virgin need not worry about potential new entrants in the market.
2.2.3 Bargaining power of Buyers Bargaining power is the ability to influence the setting of prices. Virgin has to carefully market their products with keeping in mind the cost factor. Prices will vary for each product and keeping in mind the competitor’s strategy Virgin have to always create a difference in their products in order to deliver customer satisfaction by obtaining the JIT scheduling and also have a grip on their market holding. As a result the buyers bargaining power will not be much of a cause for
2.2.4 Power of suppliers To an extent, Virgin is a large international company with a consistent growth in rapid years. As for the suppliers the main thing is the brand reputation and Virgin as a brand has met their standards. Virgin having their businesses in 30 different countries have always kept in mind their geographical coverage be it in Asia, Europe, Australia, North America and Africa in order to meet the expectations of their suppliers to ensure they have every bit of satisfaction. Virgin have maintained their relationship with customers by providing them with great service and have also maintained the quality level of service and product they provide. So the supplier power will not affect Virgin in anyway.
2.2.5 Threat of substitute products Today, with the development of science and technology especially the publicity and advertising skills are competing with the telecom industry. As of today the young generation have moved as a fast pace with the technology and always want things that are beyond expectations. As a result Virgin faces a stiff competition even though they market the products and publicize them to the very best the end customer will have more and more expectations from them. Virgin have to research and develop a technology suitable for customers where they can match up to the expectations of their customers.
2.3 Opportunities and Threats 2.3.1 Opportunities A firm’s strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. As Virgin has had a diversified line of businesses they have a stronger chance for improvement. By expanding their existing business to different other countries the marketing strategies come relatively easier for Virgin to satisfy their customers and also reach their targets. As a result of this, Virgin will have an exclusive access to high grade natural resources which in turn will help them develop favourable access to their distribution networks and will also help them to maintain a good reputation among their existing customers and also their new customers. The external environment analysis may reveal certain new opportunities for profit and growth. The opportunities that may lie for Virgin may be in regards to arrival of new and upgraded technology which can help them boost their reputation among their competitors. There may be changes or loosening in terms of regulations and laws which would enable Virgin to grow more in a global market with much ease and smooth. There may be a visibility of removing the international trade barriers which would profit them hugely. All these may lead Virgin to experience the competition with other industries thus leading them to a competitive advantage.
The absence of certain strengths may be reviewed as a weakness. Virgin as a global company who have businesses in different countries need to have access for the best natural resources and the biggest threat for them will be lack of resources. The other thing that Virgin needs to have access is their distribution channels in order to maintain their customer reputation by delivering their products using the JIT schedule, if not then this will create a bad reputation among customers which will pose a threat to Virgin. In some cases a weakness may be a flip side of the strength. Virgin as a firm might have a large amount of manufacturing capacity. While this capacity may be considered as strength that competitors do not share, it may also be considered as a weakness if the large investments in manufacturing capacity prevents Virgin from reacting quickly to the strategic environment. Changes in the external environment also may present threats to the firm. Virgin have to consider the fact that the tastes of the customer keep changing and they have to act accordingly in order to maintain their reputation in the market as by not doing so will pose a serious threat for the industry. However, Virgin has to establish a defensive plan to prevent their firm’s weaknesses from making it highly susceptible to external threats.
2.4 Conclusion Although Virgin is a large and not a old company as compared to the telecom and travel industry, through the analysis of various externals factors of Virgin,
we can come to a conclusion that Virgin as a company has brought in many diversified products making themselves grow rapidly in the industry. With the implementation of different ideas, different products and services and also varying with their strategies and adapting to the market’s external factors has made Virgin develop a competitive edge or rather an advantage over their competitors. However, in the coming years with much more investments pouring into the emerging markets Virgin will prepare themselves with different ideas and strategies to obtain a strong hold in the current and in the future markets.
4 Suggestions for Future Strategic Management To be effective as a leader, Virgin must develop skills in strategic thinking. Strategic thinking is a process whereby they learn how to make their business vision a reality by developing their abilities in team work, problem solving, and critical thinking. It is also a tool to help them confront change, plan for and make transitions, and envision new possibilities and opportunities. As Virgin develop a strategic vision for your business, there are few different criteria that they should focus on. Organization. The organization of Virgin business involves the people who have been working for them, the organizational structure of their business, and the resources necessary to make it all work. What Virgin as an organization need to
look at is what type of structure will support their vision? How will Virgin combine people, resources, and structure together to achieve their ideal outcome. Views. Views are simply different ways of thinking about something. In strategic thinking, there are four viewpoints for Virgin to take into consideration when forming their business strategy: the environmental view; the marketplace view; the project view; and the measurement view. Views can be used as tools to help Virgin think about their outcomes, identify critical elements and adjust their actions to achieve their ideal position. Observation. When Virgin is looking down at the world from an overview, they can see much more than when they are on the ground. Strategic thinking is much the same in that it allows them to see things from "higher up." By increasing their powers of observation, they will begin to become more aware of what motivates their people, how to solve problems more effectively, and how to distinguish between alternatives. By working through these few areas, Virgin will begin to get a clearer picture of exactly how their business vision can be accomplished. As their vision becomes more focused, their ideas will appear stronger and more credible. Not only will it be easier to convince others that their idea is a good one, but it will also be easier to maintain their own conviction and motivation when they reach any pitfalls or obstacles in the road.
5 References and Bibliography
Boar, Bernard H., (1947) Strategic Planning, The art of strategic planning for information technology.
Neef, Dale, (1959) Managing Corporate Reputation and Risk, A Strategic Approach.
Mabey, Christopher, 1951Human resource management: a strategic introduction
http://www.smallbusinessforum.com/showthread.php?6265-Forecasting-theFuture-Strategic-Management-Thinking (Accessed on 19th April 2011)
http://www.businessballs.com/portersfiveforcesofcompetition.htm/SWOT analysis/PEST Analysis (Accessed on 18th April 2011)
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