Virgin Group's Essay On Capabilities And Strategies" (52 Characters)

Product innovation and quality control

The common resources that link the separate Virgin companies are the Virgin Brand and Richard Branson. The founder of the Virgin group is Richard Branson. Therefore, the Virgin Company always acknowledges its parent organization. Hence many common capabilities link both companies. Firstly, the Virgin group of companies ensures product innovation constantly and also ensures that the top-notch quality of products is made available to its customers. They make sure that their products are always innovated and up-to-date for their customers based on some checkmarks like the technology used to design the products or the style with which the product is manufactured or whether the product is competitive enough for the substitute products in the market. Branson is proud that his products set the trends in terms of fashion and style. Secondly, the employees of the Branson company are treated with due ethics. This is a strategy that is utilized by any intelligent businessman. Branson is no exception. Branson hires competent managers and then treats them with due respect and does not shadow them. Branson is an excellent entrepreneur and therefore imparts wisdom to his managers from the lessons he learned from his success and failures in running a business. As a result, the employees feel motivated to work for the company thereby increasing the production of the company. Thirdly, the management styles of the companies are remarkable. In this case, the management styles include both the internal operations of the company as well as the way the company deals with the external stakeholders like the advertisers, investors, and customers. The companies are laid out a hierarchical structure recently by Branson which has aided in the autonomous power of the company in the management decisions and also the sales of the products. Fourthly, a company survives in the industry only if it provides quality and loyal customer service. The Virgin group of companies constantly makes sure that the company caters to every need and demand of its customers with due respect. The motto of the company lies in the fact that it meets all the needs of its customers and if by chance it fails to meet the needs, then at least it is capable of resolving the issue. Therefore, the company has become popular when it comes to dealing with public relations with its customers. And finally, a customer will demand a product only if he/she is not satisfied with the criteria of the good or service. Branson enters these types of markets where the demand for the product is high. When a product has high demand as compared to its supply, the value for the product is quite high. Branson fully utilizes the Blue Ocean Strategy to gain a competitive advantage and ensure that the products of the company are at par with the rival companies. This unique capability of the company pertains to value and innovation. Branson believes that if any product of his company is inessential, then it is in the best interest of the company to shut it down.

Employee treatment and motivation

Branson should consider divesting in those businesses which are not being able to achieve their targets. However, this is subject to several issues which arise. Firstly, Branson owns and regulates companies most of which are run privately. Hence, these companies do not have the proper information that is based on their performance from a financial point of view. Secondly, the current performance of any company, as well as the past performance of the company, cannot determine the future endeavors which the company might undertake. For example, if the company has incurred losses in the past, then that cannot be the key to predicting future losses. Similarly, the business that has seen profits in the past doesn't need to be incurring profits in the future too. Therefore, what should be done is that the characteristics of both the companies of Branson and the Virgin group should be considered which have the prospect of adding value. The ‘strategic characteristics’ which can generate competitive advantage can be as follows:

• The businesses are consumer-centric instead of the businesses which are producer centric.
• The business should be a start-up business since Branson is skilled in creating businesses from the scratch and not the businesses which have already been established.
• The business should have space for the entrepreneurs to come up with their creative and innovative ideas to serve their customers loyally.
• The business should consist of a dominant player which is ideally sedated and sleepy so that the Virgin group can stand against it as an innovative arriviste.

These criteria will naturally eliminate businesses such as the rail services since they are not start-up businesses, Virgin is already the established regional monopolist in this industry, soft aerated drinks such as cola since it is difficult for the entrepreneurs to innovate new ideas in this business to serve the customers and the dominant players are active here instead of being sedated and sleepy, toiletries, financial services and also designer clothes.

Branson can also contemplate divesting in businesses like the Virgin Atlantic Gateways. This is because recently the airlines are incurring losses. The Times had established that Virgin airlines were suffering from losses of 233 million pounds during the years 2010-2013. Virgin Airlines had failed to bring in profits for these consecutive years and therefore, this is a justified reason for Branson to consider divesting in this business. Another classic example where Branson might consider divesting is the Virgin Galactic. Virgin Galactic used the brand name of Virgin with a glory effect. If suppose the project of Virgin Galactic did succeed, then it would have boosted the Virgin group with the brand value. But unfortunately, this did not happen. The spaceship Two of the Galactic had incurred losses. Therefore the brand reputation of the Virgin group of companies was lost. But, the brand name of this company, that is, Virgin group stands as the pillar of the empire, therefore, Branson should divest in this business even if that divesting is a part of the strategy of Branson.

As already discussed in the earlier sections about the desirable characteristics of business where the Virgin group can generate a competitive advantage by recognizing the types of businesses. Beyond these, what should be done by the Virgin group of companies is that it should respect and value the limits to its brand image. Both the common resources, that is, the Virgin Group and Branson have undergone a common life cycle and the same generation of customers, for example, in the 1970s it has witnessed pop music, in the 1980s there was the presence of foreign travel, and finally in the 1990s, in investment products and the pension funds. The other crucial touchstone in the industry is that the Virgin Group should commence the businesses that are favorable and beneficial for making a good rate of profit margins. The examples of businesses that might fit all these characteristics may pertain to hospitals, health clubs, and private clinics which provide medical services.

Remarkable management styles

`If the Virgin Group considers diversifying, it should review Porter’s Essential Test which comprises of three basic characteristics which should be considered by any company before it diversifies. The first one pertains to the attractiveness test. This test explores the area of whether the industry which is chosen for diversification is intrinsically and constitutionally attractive at all or not or even whether the industry is effective in becoming attractive in the future. This is only the first test and is not enough to consider for diversification. The second test deals with the cost-of-entry test. This test ensures the company that the cost which the company undertakes to enter the business is sufficient enough to sustain profits in the future. Sometimes, what happens is that the cost of entry to a business is quite high and the company should abstain from entering such businesses. The last test is the better-off test. This test explores the area that the business in which the diversification will occur, whether that business is alone enough to generate a competitive advantage, or does it have to collaborate and amalgamate with other goods and services to generate the competitive advantage. The company may have to collaborate with other companies to generate that competitive advantage, for example, Virgin's mobile and Virgin's phone have to amalgamate with each other to bring about competitive advantage.

Beyond Porter's essential test, Branson should consider other characteristics also to decide to diversify which can pertain to the brand reputation. The Virgin Group of companies has many subsidiaries which have contributed to the brand reputation of the company, hence that is an important criterion for Branson to consider while diversification as it is the building structure. The new company where Branson has diversified must not damage the brand image. If Branson predicts a possibility in the future where the company might affect its reputation, then Branson should not reconsider the diversification.

To recommend changes in the financial structure or the organizational structure or even the management systems, initially, the current structure should be studied deeply. In the case of the Virgin group of companies, their formal structure is not quite developed and does not have a strong base. Here, the companies which are operating are associated with various holding companies, where most of them are offshore registered companies. These offshore registered companies have no power over the management of the company, they only serve the financial service of the company. The first and foremost linkage which is formally established is Branson, who is supposedly the founder of the company and even the major shareholder too. He even serves as the chairman of certain companies where either he or his family has considerable power. Over and above Branson, there is the presence of the corporate structure which is informal and comprises of the business associates of Branson who are the closest to him and falls within the Virgin Group of companies. These individual Virgin companies serve as executive officers to individual firms, they also provide guidance and collaboration when it comes to managing the inter-company problems. The changes that can be recommended for the Virgin Group of Companies are listed as follows:

• The Virgin brand should be protected at all costs. Presently, it is not clear about the owner of the Virgin trademark and also the terms and conditions that apply to each of the Virgin subsidiaries when they are using the brand name. What can be done at the minimalist is that there should be the protection of the brand by making sure that the brand is presented properly and also that there is a steady image of the brand which is being projected to the other business organizations.
• There should be the financing of the companies. In this case, the data available concerning the financial activities of the companies are very limited in nature. However, evidence has shown that there is financial instability prevailing in the Virgin group. The financial status of the Virgin group hovers like a mystery. This is because Branson brags about the fact that each of his Virgin subsidiaries is financially independent. Therefore, there can be two possibilities – one being that the cost of the capital for the companies is higher than it is expected to be or maybe that any one company underwent an unexpected shortage of finance which had dreadful consequences. Therefore, either a single holding company must be established or capital intensive companies should be launched as IPOs.  
• There should be control over cost management and business continuity. The entire group of Virgin companies is formally managed and controlled by Branson. But the reality is that the Virgin group of companies is huge and Branson might fall out of one of his balloons, therefore, it becomes a risky situation and therefore, there is the need for a formal corporate management level. This management would encompass the supervising of production of each company, advising the organizations on the appointments, or even coordinating the inter-company matters.

Customer service and public relations

What is taught in corporate parenting is that the parent company should take care of all the companies which are its children as a collective responsibility (Grant Robert, 2013). The skills of ownership and leadership are expected from a senior level. In this case, the Virgin group of companies appreciates all its businesses. The Virgin group can achieve value since it can understand the institutionalized markets. The Virgin Group has an entirely different team that manages the company and that management team has undertaken an excellent job by recognizing the satisfaction in the industry. Another method by which the Virgin Group was successful in adding value to the business was that the company had achieved great heights and as a result, the brand image got highlighted. The company then utilized this brand reputation to conquer the barriers to entry. The brand reputation of the Virgin Group of companies acts as a customers’ support and is quite popular among the British. And since the company is also a corporate parent, the other subsidiary companies find it less risky to join the joint venture. Since the company enjoys a good brand image and is a parent company, the companies associated with this company enjoy fewer risks in the marketplace. The next value that is added by the Virgin group is regarding the management teams. The management teams are not confined by this company. The management structure of this company is flat so that the employee can come up with creative and innovative ideas and also flexibility. The skills of innovation and creativity are always encouraged by the company for its employees so that they become successful in their careers. Whenever the Virgin Group of companies acquires partners in the market, they make sure that the new partners have an equal mindset for the partnership so that there is enough space for innovation to take place. Then these creative ideas and innovative ideas are applied in the business to make it more successful. The Virgin Group was also successful in adding workable value since it by financing and aided in the progress of its employees. The Virgin group has many subsidiaries in its joint venture since it enjoys a reputable position in the marketplace. In this joint venture, the Virgin group did indeed limit risks but if there is one subsidiary company that performs badly then the consequences are felt by the entire group since the brand name is attached to it. The management team of the Virgin companies has been performing well since they have been successful in identifying the subsidiary companies which are still in their stage of growth and have not yet bloomed fully. It also chooses the markets which have less number of competitors so that the competition faced by the company is also less. Since the brand image of the Virgin group has reached a certain peak, it is not difficult for the company to enter into certain markets which otherwise would have posed a problem, to enter and expand its market.

Richard Branson is a self-made billionaire. Though the Virgin group of companies enjoys a high position in British society, still it faces certain situations or problems which will be equally faced by the successors of Richard Branson. The problems faced by the company are discussed in this answer in detail. Firstly, Virgin underwent severe financial issues. The cash flows of the Virgin companies faced negative returns for a considerable period. The main subsidiaries which had experienced such losses were the Virgin Express, Virgin Money, and Virgin Megastores where the unloading of the equity stakes of Branson would pose difficulties. One classic example is Virgin Atlantic which is predominantly an Airlines company. The Virgin group had invested in this airline by relying on the company and expected to earn future profits. Gradually, competition increased as a result of deregulation, and thereby the airlines’ industry started to incur losses. Even in the rail industry, a financial kink was observed. According to this industry, the main issue revolved around the fact that this form of transport had achieved votes as the disliked rail operator. This issue in the rail industry also hushed away the press and as a result, the brand name of the company slowly started to fade. Since the Virgin group has a larger empire, the subsidiaries should avoid unwanted consequences and if they are not successful in doing so, then the repercussions are faced by the entire empire. For example, when Virgin Atlantic and Virgin Rail were facing such issues, other areas could not be opened in the industry. These companies of the airlines and the rail brought the image of the brand to dwindle. As a result, the Virgin Group as a parent company had to interfere in this matter. The Virgin Company had analyzed the environment. The customers are delicate and the only way by which the Virgin Group can add value is by divesting in real expertise. Hence, as a successor of this brand, the policies were undertaken by the Virgin group should be changed so that it can rely both on independent and joint ventures. In 2001, the Virgin Group of industries relied entirely upon the Virgin Atlantic for the rate of the profit margin. And to worsen the situation bit more, there were the deregulations which expanded the competition even more and as a result, all the competitors were facing losses. The rail industry faced the issues around the same time in the year 2000. Most of the British citizens used this form of transport. 25 operators were operating in Britain and the Virgin Rail was given 23^rd and 24^th rank out of these 25 operators. This industry had led to the damage of the brand reputation of the company. Hence, as a successor of this brand, the person has to undertake a lot of responsibilities to eliminate these issues.

References 

Grant Robert, M., 2013. Contemporary Strategy Analysis/Robert M. Grant.