Virgin Group Strategy Case Study

1. What are the key strategic questions that the Virgin Group asks when starting a new business venture? Virgin Group started their new businesses with the keyword: "Enthusiasm". The main question they asked themselves was "What would be the real value that Virgin can add to the customers". So they always (at least according to the case) started to walk ahead for creating unique and valuable position which will meet the needs of the customers. The company tried to look at from customers' side and tried to see the basic needs of the customers.

They haven't tried to touch all the customers; however they tried to reveal the competitive advantage of reaching to some clusters. According to Michael Porter's "What is Strategy" article we can classify Virgin Group's positioning as access-based positioning. Virgin Group asked several fundamental questions to themselves in order to add value to specific business sectors. Some examples empowering those arguments are:

  • Is this an opportunity for restructuring a market and creating competitive advantage?
  • Is the customer confused or badly served?

Positioning in different areas is not always easy (I can say it is too difficult). Virgin Group was aware of the difficulties so they had to think about the Virgin brand name. They have never entered in a business before doing solid researches and analysis. They have reviewed the industry and tried to look from customers' eyes. They were aware of the trade-offs they had to think before entering a new business venture and they have never underestimated the risks behind new entrance. So they always asked the basic questions of:

  • Is this an opportunity for building the Virgin brand?
  • Will it interact with our other businesses?
  • Is there an appropriate trade-off between risk and reward?

So we can summarize the key question before entering a new business as: "Can we create a competitive advantage that will add value (and fun) to customers and our brand name?"

2. How has the Virgin Group established a competitive advantage? Virgin Group has established a competitive advantage among its competitors by serving good value and service to the customers in different ways. They haven't followed the competitors' business or they haven't imitated their ways of doing it.

The basic and the core competence of all Virgin Group's business ventures are to do things just a little bit differently from the rest. And also they always tried to add value by adding a little fun to the business. By differentiating in strategy itself the fit of the activities and the ways of doing business have also differentiated from the rivals. So they have settled their business to an untouchable position. (At least it is difficult to imitate Virgin's strategy)

3. How would you characterize the corporate strategy of Branson's Virgin Group? The answer to that question will not be so different from the ones above. However to better understanding we can characterize the corporate strategy of Virgin Group as "Making difference and creating uniqueness" in any kind of customers' service. They are not stuck to any business field so that makes them flexible of thinking and creating new ideas for their customers and the whole consumers around the world who need (or will need) Virgin's service.

Virgin Group aims to create a competitive challenge in their customers' eyes by creating fun, adding value for their money and providing quality. To do that they are following a direction of finding / inventing of new business ventures to add value and fun to customers. Their business is not only to create value to customers by finding / inventing new ways of doing it but also to go ahead for re-inventing / re-designing the businesses for specific needs of customer segments.

4. What are the main advantages and disadvantages associated with Virgin's solicitation of business proposals from the public to help grow the business? The ultimate reason of Virgin Group's for existence is to create uniqueness and excellently serving customers in any field. So Virgin Group is not stuck to any specific field of business. (except production, they only exist for services) But it is not easy to know all the cultural aspects, the needs of customers on different geographical areas etc. So Virgin's solicitation of business proposal from public all around the world may help them to find out new needs and so new business ventures globally.

The ideas of public may be the reflection of what customers really need and how they will be satisfied. However too many proposals from different places of the world may lead to getting far away from the main focus and think about them. So that they say, they weren't accepting the proposals that are not seriously handled and analyzed. Also too many perfect proposals may lead to failure because Virgin Group may lose the sense of fun and adding value when it follows all the proposals.

They should check all the proposals with their ultimate strategy. (I'm sure they are doing that) On the other hand, assume that a proposal from a creator is too good to innovate about it. Who can guarantee the success? Virgin Group should always think above the frames that the proposal provided.

The proposal itself can see the problem in a correct way but can ask the wrong questions and can solve the problem wrongly. The biggest disadvantage of getting proposals may be framing the problems according to the proposals. Virgin Group should deploy a different and new group to assess the problem and the environment to see the ice below the sea.

5. Examine the range of businesses that fall under the Virgin Group's corporate umbrella. Does investment in these different businesses make sense from a business strategy perspective? Why or why not? Under Virgin Group's corporate umbrella there are more than 200 companies in different business fields clustering under travel, entertainment and lifestyle sectors.

The group has entered businesses varying from balloon flights to drinks and beverages. It is not easy to hold such a structure and sustain the success in all fields. If one of the companies fails to serve to customer, the whole brand name can suffer from the consequences. So normally it can be seen as a risky strategy to get into too many fields. The conglomerations are suffering from these kinds of consequences. They are getting far away from their core business day by day.

However, if we think of Virgin Group's ultimate reason for existing and their strategic way of doing business we can think that investing in different businesses makes sense. Virgin Group is not established to focus on only one sector and create competitive advantage on that sector. It rather established to serve customers in any field in different ways. That is their strategic positioning and their mission is to create value for customer. They do not indicate that they are the best in one field.

They indicate they exist for serving customers, adding value for money and providing quality. For example Coca Cola Company exists for the brand name Coca Cola. Their ultimate reason for existence is to increase the awareness and loyalty for Coca Cola brand. If they notice that the other brands of the company is known more than Coca Cola they can dismiss it.

This situation does not hold for Virgin. Their brand is for creating value and fun to customers. So to my mind, it is not unusual to live in such lots of different fields. If Virgin has chance to serve customer in all known business fields (of course in different ways), I'm sure they won't be afraid to get in to the fields. Their basic trade-off when entering a new business is whether they are creating value and following Virgin's mission to exist while keeping other services alive.

6. Which business line do you think is more likely to invest in Turkey? Why? I think the most appropriate business line to invest in Turkey is the business like Virgin Megastores have. Virgin Megastores deliver 180,000 CDs, DVDs, Games and Videos to customers in Europe. (not in all countries) Such a business line does not exist in Turkey and may add value to customers who are looking for easy access to the musical CD's, movie DVDs and video games. Actually there is not a company specified for delivering only CDs, DVDs, Games and Videos and promising to deliver them directly to the customers' door in Turkey. There are some companies delivering these products.

However their main purpose is not only to deliver these products. Some of them are online shopping companies which deliver almost all kind of products varying from books to health care products. Some of them are only specialized to sell books. Some of them only sell technological products. There are some retailers selling CDs, DVDs and video games but they do not position themselves for delivering the products to customers' doors. (Megavizyon / D&R etc.) So establishing a similar business like Virgin Megastores can add customers a differentiated value.

For the Turkish market, if we position ourselves only for selling CDs, DVDs, Videos and Games and add value to customers by serving them in the best way we can see the return of investment as quickly as possible. Our competitive advantages can be:

  1. Providing almost all kind of music CDs and movie DVDs to customers (if the products are not in our warehouse we can guarantee to find it in a specified time from anywhere in the world)
  2. Delivering the products to their home in the quickest way
  3. Ease of access and use in anywhere (by internet or gsm etc.)

7. Do a SWOT analysis for the line of business you have chosen considering Turkish market conditions. We are establishing an Online CD, DVD and Video Shopping Center which will have some branches in different locations of Turkey. (5-6 in Istanbul, 3-4 in Ankara and Ýzmir and 1 in other important cities) Of course we have to evaluate ourselves and the market to decide on whether it is worthy to enter the market or not. Let's see it:

Strengths:

  • Focusing on specific products (only CDs, DVDs and Videos)
  • Promise of delivering all kind of music bands and movie DVDs/videos to home
  • Ease of access to the internet site and ease of use for shopping (not too complicated steps for online shopping)
  • Delivering fun for customers

Weaknesses:

  • Lack of brand awareness
  • High investment costs for establishing branches in the cities

Opportunities:

  • The increasing demand on DVDs and CDs with the increase in media coverage
  • Difficulties for finding needed music band and movie DVDs from Internet (in Turkish sites)

Threats:

  • Possibilities of imitations by competitors
  • The Turkish market's negative reaction to shopping via internet
  • The quality of distribution channels (may not be the same as ourselves and can effect our image)

8. How dependent is the success of Virgin on Richard Branson? If something happened to him, would the company be able to survive? It is impossible to say that the success of Virgin Group is independent of Richard Branson's entrepreneurship. He started with a magazine and took Virgin Group to an asset with 200 companies. He gave the innovative spirit to the group, and the people working with him.

He started to innovate in different businesses in 1970s and from 1970s to nowadays he made the Virgin brand the most popular brand in UK and Australia. (100% known) Actually the answer to the question "If something happened to him, would the company be able to survive?" is dependent on the time and situations. It would be really difficult to survive if unluckiness found him in the beginning of 1970s. People around him can easily change the strategy and forget the reason of existence (providing customer difference and fun). People can focus on Operational Excellence and forget to innovate in different sectors.

That does not mean that Virgin brand could not survive but it is a possibility that the brand would not be so popular now. However I believe the leadership side of Richard Branson has taught people a lot and the executive people around him has learned so much from him. So in case of any bad luck after 1980s or 1990s I don't believe that the Virgin Brand would fail to survive.

It would survive and the probability of being such successful would be more than 50 %. But as everything is, companies and the strategies are dependent on people. If the founder is dead the way of doing business would surely change. The important question should be HOW MUCH. I believe the enthusiasm and the passion for serving customers has become the corporate culture and won't change from now.

Case study

Emergent strategy at Virgin Group

Under the strong and populist leadership of its chief executive, Sir Richard Branson, Virgin Group has pursued an opportunistic strategy to build a company with estimated annual sales of over US$10 billion by 2007. Starting from nothing in 1968, Virgin Group tried a series of strategies over the next 30 years. Its aim was to find opportunities to grow the business on the basis of what became the Virgin brand name and on the strong reputation of its founder and chief executive. The strategic trial-and-error process was essentially emergent, rather than prescriptive. This case outlines some of the main strategies with Virgin’s successes, failures and continuing business developments.

Background to the early years

After an experimental launch of a student magazine, the young Richard Branson developed a small record mail-order business in 1969 to take advantage of the end of resale price maintenance in the UK. He opened his first record shop two years later and subsequently developed it into the Virgin Megastore chain.[1] At the same time, he was attempting to develop a record label by signing up various pop artists of the time. None of these businesses possessed any clear competi-tive advantage, though arguably contractual rights to popular musicians and the Virgin brand itself had some real value. He continued to seek business opportunities using the Virgin brand and, by chance, met up with an entrepreneur wishing to develop an airline business. This eventually led to the Virgin airline business with its first route to New York in 1984.[2] In later years, the company moved into a variety of business ventures – from Virgin Bride and Virgin Cola to Virgin Trains and Virgin Mobile telephones – see Table 2.2. In terms of its strategy, Virgin Group claims to examine business oppor-tunities carefully, seeking an opportunity for ‘restructuring the market and creating competitive advantage’.

Virgin Group’s underlying business strategy

The company has developed its strategy over a number of years. Essentially, Virgin takes the view that there are always opportunities available for the hungry business executive. The underlying business logic has been summarised by Branson thus:

Business opportunities are like buses . . . There’s always another coming along.[3]

In practice, what this means is that Virgin examines new opportunities to see if the group can offer something ‘better, fresher and more valuable’ than existing companies. It looks particularly at markets where the existing customers are not always receiving value for money and where the existing companies have in some cases become complacent – trains, insurance and banking for example – and where the new internet might deliver a business opportunity. This means that the main thrust of the strategy has been to find new market opportunities where the company believes its brand name can create competitive advantage. ‘Contrary to what people may think, our constantly expanding and eclectic empire is neither random nor reckless. Each new business demonstrates our skill at picking the right market and the right opportunity,’ says the Virgin website.

[Insert UNFig near here]

Outcome of emergent strategies: Virgin focuses on geographical expansion

In the last few years, Virgin has focused its strategy on geographical expansion of its existing product portfolio rather than adding products. For example, it has taken its highly successful concept of Virgin Mobile telephones to other countries beyond its UK base. However, it remains opportunistic in its main product areas – for example, its bid to rescue the failed UK bank Northern Rock in 2007. The strategy continues to emerge – both into new countries and into new product areas.

© Copyright Richard Lynch 2009. All rights reserved. This case was written by Richard Lynch from public sources only.[4]

Case questions

1    The Virgin emergent approach to strategy development has not always proved successful – Virgin Bride and Virgin Cola, for example, remain relatively small businesses. Does this matter? Do all emergent strategies have to be successful?

2Critically evaluate Virgin Group’s strategies over the period of the case study. Was the company wise to spend so much time investing in so many new product areas? What would you have done?

Table 2.2 Selected business opportunities developed by the Virgin Group

YearBusiness opportunity
1968First issue of Student magazine – Branson’s first business venture, which was subsequently closed
1970Start of Virgin Mail Order operation – records sent by mail at cheaper prices than those of record stores
1971First Virgin Record Store opens in Oxford Street, London, UK
1972First Virgin Recording Studio
1973Launch of Virgin Records label plus Virgin Music Publishing – the Sex Pistols were signed in 1977
1984Virgin Atlantic Airways launched with limited flights between the UK and USA
1985Virgin Holidays founded (travel agency chain in the UK) – Virgin Hotels then followed in 1988
1988Virgin Megastores opened in UK – Japan followed in 1990
1991Virgin Publishing (book publishing) begins
1992Virgin Records sold to the major record company, EMI
1994Virgin Vodka and Virgin Cola launched with great publicity
1995Virgin Direct Personal Services founded – sells financial services within the UK
1996Virgin Trains launched to provide long-distance train services in parts of the UK
1999Virgin Mobile begins – sells mobile telephone services in the UK by renting space on the network of a competitor; Virgin Bride – a bridal emporium – begins with Sir Richard seeking publicity by being photographed in a white bridal gown
2000Virgin Cars – a car purchasing website; Virgin Wines – a wine purchasing website;
Virgin Cosmetics – 500 products for men and women in the UK; Virgin Active – acquisition of chain of fitness centres in UK
Virgin Blue – low cost airline launched in Australia – becomes major success with Initial Public Offering (IPO) in 2003.
2001Virgin Mobile extends into Singapore
2002Virgin Mobile extends into the USA and into South Africa
2000Virgin Group decides to grow its businesses by a geographic expansionstrategy of existing products and services, while also identifying new products and services in its home country
2003Virgin acquires stake in the British cable television company NTL, which is re-branded as Virgin Cable

 

EMERGENT STRATEGY AT THE VIRGIN GROUP: INDICATIVE ANSWERS TO THE QUESTIONS AT THE END OF THE CASE

These answers only make sense in the context of Chapter 2 of the sixth edition.

  1. 1.       The Virgin emergent approach to strategy development has not always proved successful – Virgin Bride and Virgin Cola, for example, remain relatively small businesses. Does this matter? Do all emergent strategies have to be successful?

The purpose of this question is to explore the meaning of the term ‘emergent strategy’. Thus the starting point in exploring the answer must be a clear exploration of emergent strategy. Virgin provides a useful example – partially captured in the quote from Sir Richard: “Business opportunities are like buses – there is always another coming along.” Some students will detect a lack of respect for the resource-based view here and a greater emphasis on market opportunities – see my StrategicManagement Society Annual Conference Research Paper, Baltimore, October 2003.

If one of the key points about emergent strategic approaches is their experimental nature, then it follows that some experiments are likely to fail. It is unlikely that they will all succeed. Importantly, this does not matter to Virgin Group – however, the payoffs from success must exceed the problems of losses. Otherwise, the group would collapse. An exploration of this aspect of the question may prove useful.

  1. 2.      Critically evaluate Virgin Group’s strategies over the period of the case. Was the company wise to spend so much time investing in so many new product areas? What would you have done?

The strategies were clearly only partially successful. One of the key decisions was the development of Virgin Atlantic in 1984. This secured the future of the group and allowed the company to explore other business areas in subsequent years. It is worth going through each of the business areas in the Table to examine whether they have been successful – not every class member will know about them all but enough should have some idea to form a judgement.

The issue of investing in so many new product areas is more problematic. There is no simple answer to this question which depends on the strategist’s view of the importance of the resource-based view. If the RBV is important and relevant, then it could clearly be argued that the spread of business opportunities was far too wide – even allowing for the common use of the Virgin brand name and logo. If the RBV is only one of many theories, then arguably it was reasonable to experiment in many business areas. The Virgin website has its own answer to this issue – see www.virgin.com – with a response that suggests the Virgin Group only moves into a new area if it is able to bring something different to a clear business opportunity. Some might comment that this is not consistent with some of its activities over the last few years – for example, what was so new about Virgin Bride and Virgin Cosmetics?


[1] Jackson, T. (1995) Virgin King: Inside Richard Branson’s Business Empire, HarperCollins, London, p66.

[2] Jackson, T. (1995) Op. cit.

[3] Jackson, T. (1995) Op. cit.

[4] References for Virgin case: Virgin website (www.virgin.com); Jackson, T. (1995) Op. cit.

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