Virgin

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CASE EXAMPLE

The Virgin Group
Aidan McQuade

Introduction
The Virgin Group is one of the UK’s largest private companies. The group included, in 2006, 63 businesses as diverse as airlines, health clubs, music stores and trains. The group included Virgin Galactic, which promised to take paying passengers into sub-orbital space. The personal image and personality of the founder, Richard Branson, were highly bound up with those of the company. Branson’s taste for publicity has led him to stunts as diverse as appearing as a cockney street trader in the US comedy Friends, to attempting a non-stop balloon flight around the world. This has certainly contributed to the definition and recognisability of the brand. Research has showed that the Virgin name was associated with words such as ‘fun’, ‘innovative’, ‘daring’ and ‘successful’. In 2006 Branson announced plans to invest $3bn (A2.4bn; £1.7bn) in renewable energy. Virgin, through its partnership with a cable company NTL, also undertook an expansion into media challenging publicly the way NewsCorp operated in the UK and the effects on British democracy. The nature and scale of both these initiatives suggests that Branson’s taste for his brand of business remains undimmed.

Origins and activities
Virgin was founded in 1970 as a mail order record business and developed as a private company in music publishing and retailing. In 1986 the company was floated on the stock exchange with a turnover of £250m (A362.5m). However, Branson became tired of the public listing obligations: he resented making presentations in the City to people whom, he believed, did not understand the business. The pressure to create short-term profit, especially as the share price began to fall, was the final straw: Branson decided to take the business back into private ownership and the

shares were bought back at the original offer price. The name Virgin was chosen to represent the idea of the company being a virgin in every business it entered. Branson has said that: ‘The brand is the single most important asset that we have; our ultimate objective is to establish it as a major global name.’ This does not mean that Virgin underestimates the importance of understanding the businesses that it is branding. Referring to his intent to set up a ‘green’ energy company producing ethanol and cellulosic ethanol fuels in competition with the oil industry, he said, ‘We’re a slightly unusual company in that we go into industries we know nothing about and immerse ourselves.’ Virgin’s expansion had often been through joint ventures whereby Virgin provided the brand and its partner provided the majority of capital. For example, the Virgin Group’s move into clothing and cosmetics required an initial outlay of only £1,000, whilst its partner, Victory Corporation, invested £20m. With Virgin Mobile, Virgin built a business by forming partnerships with existing wireless operators to sell services under the Virgin brand name. The carriers’ competences lay in network management. Virgin set out to differentiate itself by offering innovative

This case was updated and revised by Aidan McQuade, University of Strathclyde Graduate School of Business, based upon work by Urmilla Lawson.

Photo: Steve Bell/Rex Features

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CHAPTER 7

STRATEGIC DIRECTIONS AND CORPORATE-LEVEL STRATEGY

services. Although it did not operate its own network, Virgin won an award for the best wireless operator in the UK. Virgin Fuels appears to be somewhat different in that Virgin is putting up the capital and using the Virgin brand to attract attention to the issues and possibilities that the technology offers. In 2005 Virgin announced the establishment of a ‘quadruple play’ media company providing television, broadband, fixed-line and mobile communications through the merger of Branson’s UK mobile interests with the UK’s two cable companies. This Virgin company would have 9 million direct customers, 1.5 million more than...
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