Virgin Cas Study
Johnson, Whittington and Scholes, Exploring Strategy, 9th Edition, Instructor’s Manual strategic reasons for this success. Theoretically, this success should lie in strategic relationships (synergies and similar), which the student should explain. Where bidders’ share-prices fall particularly far, they should look for reasons for scepticism about the strategic rationale; typically, the press coverage will provide ample guidance here. ..
_… E· . – lC ase xamp e ··_·. c The Virgin GroupStudents will probably have different views on the corporate rationale of the Virgin Group as this is a private limited company and Branson uses the media very carefully to enhance his business.
He appears to have two images: the carefree adventurer and the astute entrepreneur. Students may form an opinion through the lens of either of these two images or a mixed view brought together with the views of some of Branson’s critics. Provided the logic of argument is sound, answers may display a range of opinion. The Virgin brand has benefited from its image in constantly attracting people who have new business ideas.The organisation has developed into a very effective parental developer together with the ability to enhance business ideas or reject them quickly if they do not meet Virgin’s criteria. Virgin, probably because of its private limited status, may stick with a business far longer if it feels it has a long-term strategic role such as the rail business in the United Kingdom.
As a counter to this, Virgin will sell off businesses it no longer sees as part of its strategic aims or there is something more advantageous to invest in.They will also admit defeat altogether: Virgin Cola and Virgin Computers are prime examples of this. Here we see elements of a portfolio manager. All opinions about this group, because of its size and complexity, will have elements of conjecture. How clear, for instance, was it when Branson bought the group back from public ownership that he wanted to be rid of simply earning profits for shareholders, the constraints of the City and the need for quick profits rather than the steady build up of businesses which he considers have long-term potential?The other side to this decision may have been that, from the entrepreneur mindset, he was able to buy the company back at a very competitive price and he wanted to operate without the public eye minutely viewing how he ran his various companies. Question 1: Virgin’s various diversification moves in terms of Ansoff’s framework (Figure 7.
2) Virgin’s moves exemplify a wide range of Ansoff strategies. The addition of Our Price to the existing Virgin stores was a case of market penetration (in terms of Figure 7. 2, box A).Most of Virgin’s moves have involved diversification, both related and unrelated. Virgin Cosmetics, VirginVodka and even Virgin Mobile could all be considered as launching new products and services to existing markets that is predominantly the youth markets that Virgin had established with its retail business.
These fit into the related diversification strategy in terms of product development (Figure 7. 2 box 8). The extension of the Virgin Mobile business into India could be considered a related diversification strategy in terms of market development (Figure 7. box C); existing service to a new market. The original move from Virgin Stores into the airline business was a Conglomerate Diversification strategy (Figure 7. 2 box D).
It would be worthwhile discussing with students the extent to which the Ansoff strategies should be considered as 96 © Pearson Education Limited 2011 Johnson, Whittington and Scholes, Exploring Strategy, 9th Edition, Instructor’s Manual distinct types, or more as different degrees of relatedness along continua. potential relatedness in terms of ‘dominant logic’ (Section 7. ) could be raised. question 2: How does Virgin add value as a corporate parent? should do to add value? Virgin’s parenting added-value activities include • • • • • the possible provision of a ready-made brand the opening up of more channels to finance with better terms the use of experienced start-up mangers to increase the chance of success public relations and marketing skills Similarly, the Is there anything more it . ” the ability to take a longer term perspective than would be afforded by such a group were it operating as a PLC .Students might be asked what type of parenting role Virgin typically plays – mostly the parental developer (Section 7.
6. 1). Students should then look at different types of start-up (e. g. Virgin India) and consider whether they would benefit from any of the above, and, at the same time, this may highlight other aspects that Virgin may be able to improve onto add value (even elements of ‘re-structuring’ at Virgin Rail). Question 3: Assessment of whether moving further into the banking industry is the right strategic option for Virgin.
Does the continued pursuit of this industry suggest a more careful hidden strategic plan that is not revealed to outsiders? Students should look through the case material and form an opinion whether there are distinct strategic patterns as the organisation has grown. Some of the issues that might be raised include • • • the likelihood of an organisation of this size not having some formal strategic plan. whether Virgin has been gaining sufficient experience in financial offerings what condition an industry has to be in for the Group to venture into (use Porter’s 5 forces).Does the banking sector meet this criterion? does a possibility exist to restructure this market and gain competitive advantage? does financial services constitute an ‘institutionalised’ industry that is ripe for ‘shaking up’? • • Question 4: What would be the challenges faced by a successor to Sir Richard Branson, and what might he or she do? Some of the issues students might consider include • all aspects of his ability and personality need to be evaluated and then the question is which-of these -will need to. be replicated in a new-I~~der-2. -Sollle-m~y·no! -b~ fO_!.
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. :=-. _ some may not be necessary! Some discussion of where the company is, in terms of growth and financial condition, necessary and this needs then to be integrated into the type of leader required, depending j j .::’:’=. :..
:~-=”c. • 97 © Pearson Education Limited 2011 Johnson, Whittington and Scholes, Exploring Strategy, s” Edition, Instructor’s Manual ,f 1 on the opinion formed. This should lead the discussion to do. • • • • • Change of brand image? into what the new leader may need Create additional brands to suit changing consumer preferences?Less diversification in the future? Rationalisation of the existing business, including divestments? How will the Group maintain its unique ‘fun but competent’ image in the future? This is a very large organisation which has been in the public arena for decades, so most of the students will have views on this organisation and its founder prior to considering the case. They should be encouraged to try to find a reasoned view, based on the case material and any further research, rather than just sticking to some initial judgment or bias.
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