Virgin Cas Study

Topics: Richard Branson, Virgin Group, Virgin Megastores Pages: 5 (1190 words) Published: January 11, 2012
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.

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The Virgin Group
Students 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 7.2 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 7.3) could be raised. question 2: How does Virgin add value as a corporate parent? should do to add value? Virgin's parenting added-value...
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