Virgin Group’s Successful Strategic Management

Introduction

Virgin Group is one of the most successful conglomerates in the world. It has created employment opportunities for over 50,000 people and manages more than 300 branded businesses that are located in 25 varied nations (Rahman & Areni 2014). Most people attribute Virgin’s growth to its founder, Sir Richard Branson. In fact, a mention of this company’s name leads to one thinking about Branson. Galloway, Kapasi, and Wimalasena (2019) argue that this multinational’s primary competitive advantage lies in its brand name, which is difficult to reproduce. It underlines the reason why Branson continues to diversify his business portfolio under the name Virgin. Piehler, Hanisch, and Burmann (2015) assert that it is imperative to acknowledge the role of Virgin’s leadership style and culture in its success. Globalization and advancement in technology have made it easy for many companies to devise superior brands and excellent marketing strategies. Thus, one wonders if Virgin Group will remain successful in the current competitive business world.

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Business Environmental Analysis

Porter’s Five Forces

Porter’s five forces framework facilitates the evaluation of the probable opportunities, risks, and viability of business depending on numerous critical parameters. As per Dobbs (2014), organizations use this model to improve their strategic plans and assert influence over customers, suppliers, and rival companies.

Threat of entry

Virgin Group has invested in a range of products and services that include mobile phones, the hospitality industry, airway and railway transport, and book-selling. Homsombat, Lei, and Fu (2014) posit that this corporation offers the best short-distance air transport in the United Kingdom (UK); hence it is unlikely to experience the threat of new entrants in this sector. Nevertheless, it has not established an influence in the railway industry, thus not being capable of deterring potential investors from venturing into this economic division.

Buyers’ strength

In the contemporary business world, companies must entice customers to win their trust. Virgin Group offers products and services at competitive prices, enabling it to build a broad customer base. Lei and Fu (2014) maintain that it is difficult for commuters to avoid the use of private or public means of transport every time they want to travel. Hence, the passengers have low bargaining power, especially in railway transport, as they have to travel. In addition, Virgin Atlantic does not serve all airport terminals across the globe. Hence, the company lacks influence on clients in the airline business. Furthermore, the presence of renowned brands of mobile phones like Apple and Samsung denies Virgin Group control over its target clients.

Suppliers’ strength

Virgin’s present growth is premised on its capacity to meet the standards of suppliers. Nonetheless, this company has limited influence over its suppliers, especially in the mobile phone and book-selling divisions. This corporation requires the vendors in these units to deliver products to its megastores, thus having the power to dictate the prices of the gadgets and books that they supply (Sadq 2016). Virgin has control over suppliers in the airline and railway sectors. The availability of multiple dealers and few carriers characterize these two industries. Therefore, this company has a chance to choose from the different vendors, thus having the upper hand over them.

Threat of substitutes

Many companies offer products and services akin to those that Virgin Group provides. In the mobile phone sector, this company faces the threat of substitutes from renowned brands like Samsung and Apple. Jupe and Funnell (2017) contend that in the railway industry, this business encounters stiff competition from public transport media like coaches, long-distance flights, and private cars. In the airway division, Virgin offers competitive prices for domestic flights, therefore minimizing the threat from other airline firms.

Competitive rivalry

Virgin Group faces stiff competition, mainly in the international flights and mobile phone business. Even though most firms that offer air transport services do not make a consistent profit, this has not prevented carriers from venturing into the industry. Budd et al. (2014) argue that the rivalry in the airway and mobile industry is intense and has significant impacts on Virgin’s performance. Moreover, this company encounters opposition in the hospitality division from businesses like McDonald’s and Starbucks.

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SWOT Analysis

Strengths

One of the competitive advantages of Virgin Group is that its brand is renowned across the globe, making people associate it with quality. Sadq (2016) alleges that many clients recognize the Virgin trademark even though they have no knowledge of the distinct businesses that make up this conglomerate. The use of this brand in multiple entities has helped the corporation to attract many customers, thereby overcoming competition (Snider & Williams 2015). In addition, investment in assorted products and services has enabled Virgin Group to diversify its operations and increase profit margin. This corporation’s emphasis on excellence and the application of total quality management (TQM) has enabled it to reduce operations costs and boost returns.

Weaknesses

A key weakness of Virgin Group is its inability to create an effective differentiation strategy. In spite of this organization being in the airway industry for many years, it has not established a solid difference. Numerous airline companies have replicated Virgin’s strategies, enabling them to offer superior services. Consequently, this firm continues to lose clients to corporations like British Airways and the Fly Emirates. The use of a single brand name across all the business units is a major weakness for Virgin Group. A failure in one of the divisions may affect the reputation of other branches.

Opportunities

Virgin should take advantage of the changes in consumer preferences to boost its performance and grow its product and service portfolio. The demand for mobile phones continues to rise as more people have access to network coverage and the Internet. Consequently, this company has a chance to benefit from the cell phone industry if it can manufacture superior devices. Galloway, Kapasi, and Wimalasena (2019) emphasize that the number of professionals who are joining the corporate world is growing by the day. Therefore, the chances are high that the demand for business travel will rise. As per Hari, Yaakob, and Banitha (2015), many people are disposed to paying for air transport provided that they are assured of comfortable flights. Thus, Virgin Group is bound to profit from the airway business once it provides quality services.

Threats

One of the major threats that this conglomerate is facing is the Brexit uncertainties. Since Britain announced its intentions to leave the European Union (EU), this company has lost many customers, particularly in the airline business. Virgin experiences competition from organizations like Lufthansa, Cathay Pacific, Fly Emirates, and British Airways. It also encounters rivalry in the mobile phone and hospitality businesses from firms such as Apple and McDonald’s, respectively.

PESTEL Analysis

Political situation

Political factors like taxation policies, labor regulations, and trade limitations affect the performance of the Virgin Group. Preston (2016) argues that this company experiences political challenges because it has to comply with the policies that govern the overseas markets. According to Zahari and Romli (2018), the United States’ import customs and tariff duties hinder Virgin’s ability to export a lot of goods into this nation. Moreover, the UK government deregulated its air travel, making it possible for many airline companies to operate in this country. In return, the increase in the number of airlines that serve the UK market has affected Virgin’s profitability. Another political factor that impacts this company’s operations are employment policies. For instance, Virgin is expected to offer equal opportunities to all workers regardless of their gender, race, religious affiliation, or sexual orientation. Moreover, this firm is not supposed to deny its staff the opportunity to join trade unions.

Economic situation

Economic aspects that influence the operations of Virgin Group include changes in prices of goods and services, inflation, and interest rates. Virgin Atlantic, an airline subsidiary of the Virgin Group, was compelled to lower its flight charges following a similar move by rival companies, including Qatar Airways, American Airlines, and the Fly Emirates. Galloway, Kapasi, and Wimalasena (2019) cite the increase in the cost of fuel as one of the challenges that have impacted the performance of Virgin Atlantic. In addition, the decline in the number of tourists has had a toll order on Virgin Hotels. Global economic instability, especially the depression witnessed between 2008 and 2010, led to Virgin incurring huge losses.

Social situation

The level of income in the majority of households across the globe continues to improve as millennials join the corporate world. It implies that the demand for Virgin’s products and services is expected to increase. For example, the need for air travel among professionals is projected to rise, thereby creating business opportunities for Virgin Atlantic. In addition, today, most people have access to the Internet. Consequently, the demand for mobile phones, especially smartphones, is anticipated to grow. Virgin Group has a chance to expand its mobile phone division by selling superior internet-enabled gadgets.

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Technological situation

This multinational corporation encounters varied technological hurdles in an effort to streamline its operations. Berghöfer and Lucey (2014) allege that Virgin Atlantic has been unable to leverage technology effectively in its booking system. The UK has not invested in the modern railway infrastructure, making it difficult for Virgin Rail to offer quality services to its customers. Notwithstanding these technological issues, this company has exploited the advancement in information communication technology (ICT) to reduce operations costs. Moreover, Berghöfer and Lucey (2014) argue that Virgin Group has taken advantage of modern technologies like electronic commerce and processes outsourcing to boost product and service delivery.

Environmental situation

The call for environmental conservation has led to many companies altering their operations to mitigate global warming. Virgin Group seeks to end the use of ink, papers, and other materials that contribute to environmental pollution. Moreover, its airline is reviewing the use of limousines to transport passengers to Manchester, Gatwick, and Heathrow Airports. This company plans to partner with Volvo to develop modes of transport that are environmentally friendly. Moreover, Mauricio (2014) alleges that this firm has reduced the weight of luggage that its airplanes carry as a measure to minimize fuel consumption. In return, this has lowered the degree of carbon emission attributed to Virgin’s aircraft.

Legal issues

Virgin Group faces numerous legal challenges that affect its operations in the global market. A good example is one that pitted Virgin Mobile against T-Mobile, which compelled the former to purchase shares in their joint venture. These two firms were embroiled in an ownership battle with each entity trying to dominate the market (Clark 2014). In the United States, this company has been involved in numerous trademark wars that have affected its brand, resulting in poor performance.

New Strategy

Virgin Group focuses on growing its business portfolio by exploiting every potential opportunity that seems lucrative. Today, this conglomerate has over 300 distinct businesses that operate under a single brand name. As per Aguirre-Rodriguez (2014), the leadership of Virgin Group is good at spotting markets that are not yet saturated or are having possible growth. Burns (2018, p. 23) posits, “It is this expertise and experience that is coupled with the strategy to offer more to customers for less than has enabled Virgin to plow through complacent business industries.” The popularity of the Virgin brand has helped this company to overcome all challenges that investors encounter in their bid to expand into new businesses. Sadq (2016) argues that the public acceptance of this trademark has been critical in enabling Virgin to invest in all fields, which its management trusts can add to the company’s profit margin.

At times, venturing into fresh markets or products can be costly to a business, especially if its executive lacks sufficient knowledge about the novel investment. It underscores the reason most organizations opt to merge or partner with firms that have already been operating in the fields that they wish to target. Virgin Group leverages joint ventures in the effort to expand its business range. It allows this firm to utilize the expertise that its allies possess. In return, a company that partners with Virgin profits from its superior brand and financial strength. The leadership of Virgin Group appreciates the importance of employee empowerment. As such, the managers of the joint ventures are given the authority to make resolutions on matters that affect their operations. This move facilitates organizational growth since it eliminates bureaucracy, motivates workers, and allows timely decision-making. A company has to forfeit short-term gains for it to achieve lasting growth. Uggla (2014) argues that most business units that form the Virgin Group witnessed an extended period of poor performance before they could finally become profitable. Each entity operates independently, and the management discourages sharing of assets between businesses.

Identifying and exploiting existing smugness within a market can assist a business to improve performance. Virgin Group has grown its business range by spotting and leveraging complacencies in different industries. This company encourages innovation and uses it to add value to clients by offering quality goods and services. According to Bereznoi (2015), the senior management team of Virgin Group is composed of ingenious people who have had significant success in their careers. This company partners with firms that share in its belief in differentiation and inventiveness. For instance, Virgin Mobile has formed alliances with numerous telecommunication companies to enable it to provide communication services. As per Halal (2015), Virgin’s leadership realized that there existed complacency in the network management. As a result, it embarked on providing exceptional services that revolutionized the industry. They included “cheaper prepaid” offers, “no monthly fees,” and “no-line rentals” that were received well by many customers. Even though Virgin Group does not have a network company, it is known to provide the best wireless services in the UK. Associating with like-minded businesses enables Virgin to instill the culture of innovation in all its new ventures, thereby guaranteeing their success.

Challenges

Today, the various business units that makeup Virgin Group encounter a myriad of challenges that might hinder its continued success if not addressed. For many years, the biggest share of this conglomerate’s profit has originated from the airline business. Nevertheless, competition in this industry, coupled with the deregulation of the UK market, has resulted in a decline in Virgin Atlantic’s revenue (Pearson & Merkert 2014). A review by the Strategic Rail Authority ranked Virgin Rail as unpopular. This report was made public, leading to the company losing a lot of customers. The use of a single brand to manage multiple business units is affecting the performance of the Virgin group. As Uggla (2015) alleges, all businesses within the Virgin Empire were doing well when this multinational had good publicity. It is imperative to acknowledge that this company’s success depends on the reputation of each entity. Negative publicity of any unit would affect the performance of the entire multinational. Today, Virgin’s brand name continues to lose connection with the people due to poor performance by some of its affiliate businesses. Yu, Chen, and Chiang (2017) declare that public confidence is a sensitive issue, and firms should protect it at all costs. The poor ranking of Virgin Rail, together with the negative press coverage of this multinational, has led to Virgin Group losing many clients.

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Conclusion

Virgin Group is a renowned brand across the globe with businesses in over 300 industries. This multinational has invested in music, telecommunication, hospitality, railway, and airway sectors, among others. The company uses innovation and cost-leadership strategies to deter potential investors from venturing into areas that it operates. The business offers competitive prices to air travelers, making Virgin Atlantic the most preferred airline amid domestic clients. Nevertheless, it faces stiff competition, especially in the mobile and hospitality businesses. The deregulation of the UK airline industry has led to Virgin Atlantic encountering rivalry from airlines like Qatar Airways, British Airways, and the Fly Emirates. An increase in the number of professionals that are joining the business world, together with high disposable income amid many households, has resulted in the rise in demand for air transport. Virgin Atlantic is exploiting this opportunity by offering superior services and fair prices to its clients. It is considering terminating the use of limousines to transport its executive clients as a way to minimize environmental pollution. Forming alliances with other companies have enabled Virgin Group to grow its business portfolio and mitigate risks.

Recommendations

For Virgin group to remain successful, it must stop expanding its portfolio and work on improving the existing businesses. The leadership of this multinational should acknowledge that having a popular brand name is not enough. It should make sure that the current ventures offer excellent services to prevent further erosion of public confidence. Improving the performance of Virgin Rail will enable this corporation to not only boost its profit but also win customer loyalty, hence building a good reputation. The conglomerate should also come up with a novel strategy that allows it to operate both autonomously and to partner with other companies. It must abolish the ‘ring-fenced policy, which prevents profitable businesses from bailing out those that are not doing well. This will ensure that Virgin Group does not close some of its entities, a move that might affect not only its profit margin but also public image. The objective is to guarantee that this corporation does not operate under regulations that are based on a certain philosophy.

Reference List

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