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Richard Branson and the Virgin Group

1. What common resources and capabilities link the separate Virgin companies?

Resources
The main resource is Branson, who founded the company in 1970. His strong leadership is vital to
developing new capabilities for VirginBrand.
He is famous worldwide for its unique corporate culture, and entrepreneurial spirit

- Brand
With this intangible asset,the brand, the group was able to create other companies representing quality
of services and value for money. The value to organisational growth and competitive advantage has been
huge.

- Finances
Financial reporting by the Virgin companies was fragmented, difficult to locate, and not consolidated
because of lack of public information and different financial years.

- Innovation

Informality and disrespect for convention were central to Branson's way of business . Over the years,
Branson has become more of strategic and charismatic leader of the Virgin Group.

Capabilities:
Virgin common capabilities are the industry links, the identification of virgin frills, the seek for global
presence increase and the management and marketing.

Two important business developments helped create the Virgin brand of today. The record company and
The Virgin Megastore businesses, that created this “youthful” image for Virgin.This capability of brand
communication was not just about value for money, but was also linked with social values. The brand was
not associated with any specific product or market , so it allowed Virgin to differentiate with a positioning
of small, innovative and customer-friendly company.


2. Which businesses, if any, should Branson consider divesting?

Virgin has done well in the establishment and management of new businesses over the years, but some of
its businesses declined because of the economic downturn. The recession of 1979 to 1982 affected
several business ventures . In the second half of the 90s Virgin’s business recovered with new ventures.
Factors that cause this new ventures have been:

Privatisation and deregulation

Virgin Express dominated the airline industry due to its management style and offering customers value
for money. In the 90s took advantage of the liberalization and deregulation in Europe to expand but the
airline industry requires a lot of initial capital, high fuel cost, taxes. and competition in the low cost such as
Easy Jet was very strong.

The entry into travel was Virgin’s biggest, and potentially riskiest, diversification of the 90s and Virgin
Rail suffered as well from the UK’s privatized rail network.
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Direct selling of goods and services to consumers

Branson was continuously looking for business opportunities offering something new to consumers.

The Virgin Trading Group Limited brand comprised Branson’s beverage and failed to gain market
presence. The Virgin Vodka drink was packaged in a “Pammy” bottle based upon the body of Pamela
Anderson. This has been a massive source of publicity, but has not converted into sales.

The “Technology, Media, Telecom “ boom of 1998–2000

The TMT boom hit Virgin. Virgin foundations in media and the Internet offered a new channel for Virgin to
reach consumers but he impact of Internet file sharing and illegal recording of CDs has been a major
problem for Virgin Entertainment

3. What criteria should Branson apply in deciding what new diversification to pursue?

Key factors Branson should take into account for the diversification are the industry attractiveness, the
innovation, the brand extension, the internal labour markets, core resources and capabilities that they
posses and will be needed for the diversified activity, the parenting advantage and Virgin’s attractiveness
to partners. Virgin group is too unfocused, they could get out of businesses that do not fit their image
because one failing business will affect all the others.

The biggest competitive advantage Virgin’s posses is their brand name and so they have to try to avoid
dissolution and not to diversify on those segments that can risk it’s brand name and the company in
general.

The development   of the Virgin group has been following similar pattern as Branson generation: pop
music in the 1970s, foreign travel in the 1980s,pension funds and investment products in the 1990s. (What
next? Old people’s homes and funeral parlors?) The other key criterion is industry attractiveness: Virgin
needs to enter businesses that have the structural characteristics conducive to good profit margins. What
kinds of businesses might fit these criteria – health clubs, medical services through private clinics and
hospitals.

4. What is the Virgin business model?

Virgin business model is focused in differentiation

“focused differentiation”(new markets,nex products)

Business model design includes the modeling and description of a company's:

- value propositions
- target customer segments
- distribution channels
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- customer relationships
- value configurations
- core capabilities
- partner network
- cost structure
- revenue model
The success of Virgin can also be traced to its organizational structure and culture. Organizational culture
is a firm resources of great strategic importance that is potentially very valuable which relates to its values,
traditions and social norms. Virgin's ability to operate effectively with so little formal structure or
management systems owes much to the group's organizational culture as defined by Branson's own
values and management style (Grant, 2010:818). He draws inspirations from the ideas of others and
encouraged submission of new business ideas to its corporate offices. Employees are encouraged to
develop business ideas for new businesses. The idea of Virgin Bride was actually from a Virgin Atlantic
employee appalled of products and services offered by bridal stores in the UK. Employees have stakes in
the group and strive to make the company succeed, allowing them to manage and control the company
and also to enjoy the benefits of their success. In 1993, Branson summed up Virgin's relationship with
employees as 'staff first, then customers and shareholders.' Virgin's capability is in using employee’s
competence and commitments in achieving organizational goals which can only happen where there is an
open workplace structure and culture.

5. What changes in the financial structure, organizational structure and management systems of the
Virgin group would you recommend?

Regarding the financial structure, they should find new sources of financing. They’re not consolidated so
another solution could be to consolidate financial reporting and to franchise the brand Virgin.

About the organizational structure, they lose alliance of companies; they have a little hierarchy (horizontal
structure), no board of executives, short communication lines and entrepreneurial spirit. So we
recommend to centralized headquarter, to continue with network of interlinked small companies and
have an overall company consolidation.

So, what happens when Richard Branson retires? Firstly we analyze the status quo of Virgin. The way of
motivation, the high level of freedom at work, the great deal of responsibility and freedom for employees
and the informality and disrespect for conventions. Our recommendations in the management system are
to centralized top management and centralize and systematic way how to manage Virgin group.