Background Information and Challenges of the Virgin Group
From 1968 to 2007, Richard Branson leads the Virgin group to become a conglomerate of more than 200 companies with business in music, airlines, rail transport, soft drinks, radio broadcasting and etc. (Grant 2005a:309) The Virgin Group followed many other companies during the 1950 to1980 period in adopting diversification as a mean for corporate growth. The boom of unrelated diversification of the early 1960s and 1970s was halted abruptly however by the failure of many large diversified companies (Grant 2005b:447). The simple action of bringing various businesses together under a single ownership itself was clearly not sufficient in creating shareholder value. The following years saw a reverse trend in diversification where large conglomerates either become unprofitable and declare bankruptcy or chose to de-merge to form more focused corporations around more related capabilities (Besanko et al, 2007:287). Related diversification offered greater potential benefits, but may also posed greater management problems in managing such that such potential advantages may not be realized (Grant 2005b:463). In an era of corporate refocusing and the nurturing of core competences, the Virgin group faced, and keeps facing major challenges in managing a large diversified company. The success of Virgin can be in grand part attributed to Branson’s innovative style of management.
The Culture of Virgin Group- Branson’s Management
The Virgin Group chose to adopt a related diversification of many companies spread across very unrelated business (from airlines to soft drinks), but sharing common management capabilities and strategic management systems. Virgin is formed by mostly start–up companies which benefited from Branson’s management techniques and almost all sell to final consumers and are in sectors that offer innovative opportunities for product differentiation (Grant 2005b:463-464). The Virgin Group conglomerate is de-centralized structure where each business (counting almost 200) is run as a small company and it’s able to make most decisions without corporate management intervention. These companies indeed are all under the Virgin umbrella, but they are generally not subsidiaries. Each company will help each other when it is needed, but otherwise they are independent. Employees have a stake in their success by feeling as being part of a small team of people, not a unit in a large multinational company. Richard Branson’s use of joint ventures was an extension of the Japanese keiretsu system (multiple companies interlocking through managerial and equity linkages in a collaborative network). In a speech to the Institute of Directors in 1993, there were a few slogans being introduced by Branson. “Staff first, then customers and shareholders” “Shape the business around the people” “Pioneer, don’t follow the leader”. “Capture every fleeting idea” and “Drive for change”. (Grant 2005a:326)
With these principles at the core of the Virgin culture Branson created an environment in which talented, ambitious people were motivated to do their best and strive for a higher level of performance. While the working environment was informal, anti-corporate, and defined by the pop culture of its era, expectations were high. Financial rewards for most employees were typically modest, but non-pecuniary benefits included social activities, company-sponsored weekend getaways, and impromptu parties. The apparent chaos of the Virgin group, with its casual style and absence of formal structure and control systems, belied a sharp business acumen and forceful determination of the Virgin group. Virgin possessed considerable financial and managerial talent, and what Virgin lacked in formal structure was made up for by a strong culture and close personal ties. The Virgin organizational structure involved very little hierarchy, offering short lines of communication and flexible response capability....
Please join StudyMode to read the full document