The Strategic Direction and Development Of Virgin Group

1. Strategic Development at
Virgin 2013
Case Study

2. Content
 Overview.
 Virgin’s origin and history.
 Richard Branson.
 Virgin Growth.
 Corporate Rationale .
 Corporate Parenting.
 Challenges facing the group
 Corporate future strategy.
 Branson’s departure.

3. Overview
 The Virgin Group is a highly diversified organization
 Founded by Richard Branson
 Leading entrepreneurial brands with over 200 companies.
 Operates globally across 29 countries.
 Complex organizational structure.
 High emphasis on innovation.
 Strong Brand image ‘Consumer’s Champion’.

4. Richard Branson
 Branson is known for his charismatic, risk taking, fun, and daring
persona that enabled him to build a business empire projecting his
own personal philosophy.
 Richard Branson flamboyant style and flair for publicity generate
interest and awareness which has enabled Virgin to create a brand
image.

5. “A
business has
to be
involving, it
has to be fun
and it has to
exercise
your creative
instinct ”.
Personal Philosophy

6. Virgin’s History
 Branson started by selling mail-order records, by which
he gained access to high street retailers, enabling him to
open an Oxford Street Store in 1970
 After wards the business expanded into record labelling
as Virgin Records.
 In 1984 Virgin Atlantic, a low-cost transatlantic airline.
The first foot in conglomerate diversification.

7. Virgin’s History
 In 1986 it was floated on the stock exchange. However,
Branson’s personality wasn’t compatible with the
accountability required of a chairman of a public
corporation.
 In 1988 he bought out the external shareholders and
retuned the group to private ownership.

8. Virgin Growth
 Music
In 1987 the group expanded their business by establishing
Virgin Records America, seeking a new, larger market.
 Travel:
Deregulation of the railways provided Virgin with the
opportunity to form Virgin Rail.
Deregulation in Australia and Nigeria allowed Virgin
to set up other low-cost Airlines.

9. Virgin Growth
 Media & Mobile
The beginning of cellular communications and deregulation of the
telecommunications sector in the UK led to the setting up of Virgin Mobile.
 Lifestyle:
Branson was drawn to markets were he perceived undue conservatism, a
lack of innovation and under-served customers in industries related to
lifestyle including , health clubs (Virgin Active), drinks (Virgin Drinks), and
bridal enquiries (Virgin Bride).

10.  Money
In 2007 Virgin acquisitioned Northern Rock, a medium-
sized UK mortgage provider, to enter financial sector.
Virgin Growth

11. The Breadth of the group activities

12. Strategic Development Directions
Market Penetration Product Development
Market Development Diversification
Existing Product New Product
ExistingMarketNewMarket

13. Corporate Rationale
 It is the way in which a corporate parent envisages the
way that it can add value to its strategic business units.
 The Virgin Group’s rationale is to diversify into as many
markets feasible, and extend the Virgin brand name
further at a low cost; where stature could be relied upon
to reduce barriers to entry into static markets.

14. Corporate Rationale
 Ring-Fenced Businesses :
The operating companies of virgin group are all separate entities, financed
on a stand alone basis.
 Flat Management Structure:
No direct lines of reporting or control in the group with minimal
management layers and no bureaucracy, significant autonomy level.

15. Corporate Rationale
 Diversification into as many markets feasible in order to extent the
virgin brand.
 The sacrifice of short term profits to earn long term growth.
 Acquiring innovative partners, pioneers in their fields, matching
Robinson’s persona.

16. Corporate Rationale
 Offering low cost, better quality product to a complacent market in its
growth phase.
 Involvement in new projects that meet 4 out of 5 criteria:
 Innovative
 Good Quality
 Challenge Authority
 Offer value for money
 Must be in a growing market

17. Corporate Parent-Adding Values
 A corporate parent is responsible for allocating capabilities
and coordinates between business units in order to achieve
synergy and consequently economies of scope.

18. Corporate Parent-Adding Values
 Virgin’s Adding Values
1. Understanding institutionalized markets.
The ability to identify complacent markets in its growth phase,
monopolized by few rivals, where there is a lack of innovation and
an underserved customer. So they shake up the market by offering
more to the customer for less cost.

19. 2. Virgin brand name:
Considered the most important asset in the group, representing :
 Value for money.
 Fun.
 Good Quality.
 Brilliant Customer service.
 Innovation.
 Anti Establishment.
Corporate Parent-Adding Values

20. Corporate Parent-Adding Values
3. Extensive network of contracts and partners:
Virgin excels in combining skills, knowledge, and expertise to build
exciting and successful companies.
4. Public relations and Marketing Skills:
Richard Branson adopts a hands-off policy unless it comes to marketing
and publicity he takes a more involved and highly active role.

21. Challenges
 Both virgin media & virgin Rail have had many customer
complaints and in the summer of 2012 virgin rail seemed to have
lost its franchise on the west coast railway line. Critics have
suggested That Rail is weakness in virgin's portfolio.
 There is a rising concern regarding the extent of the group
diversification, and whether its own image became too diluted.

22. Challenges
 The departure of Richard Branson is the big elephant in
the room. Many concerns are rising regarding the future
of the group and whether it’s capable to stand on its own
without Branson’s guidance.

23. Future Corporate Strategy
 The group should consider changing its policy to accommodate both
independent and joint ventures to rely upon short term profit on few
of its businesses.
 Release the ring fenced policy:
So that important revenue making companies can be saved and
supported during low times.
 Virgin should save their brand image from further dilution, by
becoming less diversified.

24. Will the Virgin Group survive Branson’s
departure?
 The concern rising from Branson’s departure is mainly due to the following:
 Brand appeal and public image are directly linked to Branson himself.
 The lack of a formal organizational structure.
 The group’s financial situation.
 Succession planning is essential to ensure that the organization will have the
ability to stand on its own once Branson departs.

25. Will the Virgin Group survive Branson’s departure?
 Organizational restructuring:
It’s important for the group survival to be restructured to a formal structure
with centralized decision making body, such that any other top opinion former
coming after him can easily fit in.
Virgin group should also have a corporate headquarters, where the group’s
policy and financial decisions are centralized.

26. TEAM MEMBERS
SAMAR HASAN
8132484
HANEEN YASSIN
8132472
LAYLA ALIA
8130261
MANAL DARDOUR
8132726
REEM SHATARAT
8131444
SEMA MUSHTAHA
8142413