Virgin Group: Diversification and Strategy

This assignment examines the business strategies employed by Virgin Group. It delves into the group's diversification efforts, highlighting both successes and areas requiring improvement. The analysis focuses on organizational management style, core resources and capabilities, and recommends divestment from specific industries to maintain a strong brand image. The goal is to provide a comprehensive evaluation of Virgin Group's current position and suggest strategies for sustained competitive advantage.

Running Head: Strategy and Innovation 1
Case Study Analysis of Virgin Group

Strategy and Innovation 2
Contents
Overview..........................................................................................................................................3
Answer 1: Resources and Capabilities............................................................................................3
Resources.....................................................................................................................................3
Capabilities...................................................................................................................................4
Answer 2: Divestment.....................................................................................................................5
Criteria.........................................................................................................................................6
Answer 3: Recommendations for changes......................................................................................6
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

Strategy and Innovation 3
Overview
In the current era of globalized business, both large as well as small companies are trying
to survive with their business in the market by various strategic transformations. The
international market is highly competitive now due to globalization and now, companies are
adopting the most popular strategy i.e. business consolidation. Some companies take consider it
useful for the sustainability of the business in the market. As the result, various companies are
going by one form of reorganization and restructuring or the other in order to stay competitive in
the international market and attain the organizational objectives (Nicolini, 2012). Based on the
given case study, Virgin Group is now expanding and developing new business with the capital
value and cash flows which enable the company to achieve the ultimate goals as contrasting to
unite the resources and profits of the group with the accounting profits. This report basically
attempts to answers the questions of the case study in terms of the structure, management and
operations and resources and capabilities of Virgin Group of companies.
Answer 1: Resources and Capabilities
Resources
Resources can be described as the productive assets owned by the company. Basically,
resources can be divided into three catagories i.e. tangible, intangible, and human resources.
Along with this, capabilities refer to the ability of the company to perform its business
operations. In case of Virgin Group, there are various resources which are identified.
Tangible resources-
In terms of tangible resources, there are no consolidated accounts for the group and the
financial position of the group is still questioned. It is observed that Virgin Group focuses on the
long term capital growth rather than short-term income and investment which are common
within the Group. It reveals that the financial resources of Virgin Group are strong (Grant &
Jordan, 2012).
Intangible resources-

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In terms of intangible resources, branding of Virgin Group is the greatest resources
among all the available resources. There are basic six values i.e. good qualities, value for money,
excellent customer service, innovative, fun and competitive challenging in which Virgin group is
operating. These values are helpful for Virgin Group to differentiate itself from the competitors.
The values are also effective in gaining the satisfaction and trust of the customers (French &
Schermerhorn, 2008). Based on the point of view of the customers, the strong positive brand
image will be among all the companies of Virgin Group. Along with this, the organizational
culture of Virgin is more casual including minimal management hierarchy and staff. This culture
allows the employees and staff to share their viewpoints, ideas, objectives and values within the
Group.
Human resource-
In case of human resource of Virgin Group, various experienced employees are working
in the various companies of Virgin Group and training is provided to them according the
management style of Virgin Group (Aladwan, Bhanugopan & D’Netto, 2015). If a new company
is to set up, then employees within the group are free to switch to work in the new company
(Ruiz-Palomino, Martı´nez-Canas & Fontrodona, 2013).
Capabilities
Capabilities of Virgin group include networking, management, innovative business ideas
or products and risk diversification. Branson has adopted hands-on approach in order to operate
the business in the market. Trust managers run new business and financial managers provide
advisory and managerial support to these new companies of Virgin Group. This management
capability of Virgin Group allows the companies make the Virgin companies specialized in their
field and also benefits to Virgin Group. Further, Virgin Group has its business in various fields
and these companies make a strong network so that benefits can be provided to each other and
developed a ‘win-win situation’. Further, Virgin Group decides to starts a new business then it
focuses on the benefits which could be provided to the existing business. So, the business
network of Virgin group is stronger. Next, Virgin Group is also engaged in various industries
which allow the group to diversify and minimize the risk and maintain the growth while one
industry declines.

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Answer 2: Divestment
There is the privatization drive of UK government and by the way of straight financial
support and the managing state owned companies, Branson and the Virgin Group have started
various businesses without any restrictions.
Branson identified and adopted this opportunity as a ‘useful chance’ to develop and expand the
business. He grasped that opportunity to achieve the gainful resources. Virgin entered a large
area of distinct commerce which was a pathetic connection for the group. According to financial
analyst and public opinions, this is the possible reason for its reduced economic presentation.
After the cautious examination of given case, it is recommended that Virgin Group must improve
and sustain its return on investment. Branson should be separated from the following business:
transportation business, financial services, Beverage and cosmetics and Apparels. The rational of
these businesses for divestment is described below:
Transport business- Branson should divest from transportation business including both air and
rail travels. It is observed that the transport industry is unbeneficial for many decades. The
companies working in this industry have also faced unhelpful side in terms of financial scale as
compared to other industries. Focusing on Virgin Group especially, the privatized railway
industry in UK acquired by Virgin Group has performed very poorly that it has ruined the
established brand name of this group. Virgin Rail is known to set bad records of the poor
performance. So, it is recommended that Virgin should divest from this industry in order to avoid
total collapse.
Financial services (Virgin Money) - This is one more industry in which Virgin group is
intensely occupied. Based on the case study, it is observed that the financial sector contradicts
the culture of Virgin Group. According to various public opinions, the customers are seeking for
the long-lasting financial services from the companies having strong background but this is
lacking in the Virgin Group (Shaxson, 2011). Branson has capability to expand the Virgin Brand

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but financial service sector is not profitable for the group. So, Virgin should divest from this
industry for the good brand reputation (Carton & Hofer, 2010).
Beverage and cosmetics- Branson is still much unfocused for his business directions. Virgin
brand covers the business like beverages and cosmetics but this industry is the cause of risk of
losing brand name. Branson is still nonspecific and should depart such business immediately and
should come up with another brand name for such business. The Virgin trade venture i.e. Virgin
Wine is not appropriate for the impressive product name. It is the fact that most of such
businesses including the brand are non-performing. So, it is recommended that Virgin Group
must divest from this business (Montano & Kasprzyk, 2015).
Apparels- It is observed that Virgin Group focused on the Apparel business. Based on the
recommendation of the employees, Branson started this business. This discouraged the Virgin
employees from being innovative. In terms of growth, Branson obtained bankrupt health club
chain in South Africa and that has no any evidence of economic assistances to Virgin Group.
This was a loss for Branson. Based on the business point of view, such type of achievements are
uncontrolled reserves that will only damage the brand image of Virgin Group. So, Branson must
dissociate from this business and invest the money in the successful industry i.e. telecom
industry.
Criteria
There are some key factors which should be taken in to account by Branson for the
diversification are industry attractiveness, brand extension, innovation, internal labor market,
core resources and capabilities. These factors are needed for the diversified activity and
increasing attractiveness among the partners (Hammer, 2010). Other criteria for Virgin Group is
industry attractiveness i.e. group needs to enter the business that have structural characteristics
along with good profit margin. Under these criteria, business can be medical services by private
clinics, health clubs and hospitals
While focusing on diversification, there are three areas where should be investigated i.e.
growth, creation of value and risk reduction. Without diversification, company will not be
able to get success. So, while Virgin Group decides diversification in the services, growth must
be one of the important factors for consideration.

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Further, next area is value creation in which three important test should be used in order
to create value for the company. Those tests are ‘attractiveness test’, ‘cost-of-entry test’ and ‘the
best-off test’. When the group is investigating for new diversification, they must focus on the
competitive advantage in the industry (Wrench, 2016).
Next, risk reduction is also crucial factor for diversification. When an organization is
operating in a specific industry then it has to deal with various threats. In such case,
diversification can be used to minimize the impact of risk in the industry.
Answer 3: Recommendations for changes
Mr. Richard Branson is the famous personality of Virgin Group and a great industrialist
in all over the world. He has consistently maintained the management style and business values
within the group. According to various business analysts, the disjoint companies of Virgin Group
are not performing properly and that is the reason, the future of continuity and survival is
uncertain. Virgin Group should change and redeploy on the business along the following lines
i.e. organizational restructuring, management restructuring, financial restructuring and business
consolidation (Ghobadian, 2008).
Organizational restructuring-
Virgin group is described as the flat organization as it is centered to an individual. Virgin
Group is unable to operate under the formal structure. It is true that Branson has outstanding
trade sense but still, there is the need to restructure the organization. In order to ensure the proper
succession plan, Branson needs to reform Virgin Group to an official constitution along with the
central decision making body. Further, Virgin Group should also have corporate headquarters
where the financial decisions and policy of group are centralized (Robbins et al, 2013).
Management restructuring-
It is difficult for Branson to differentiate Virgin Group with the current structure. The
current style, culture, and working principles of Virgin Group reveals believes and values of
Branson in the business. But, there is no centralized policy and decision making body within the

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Group. So, there is the need to rethink and an action for change. It is recommended that the
decision making procedure should not be according to believe and personal view points of
Branson. It should be based on the commonly acceptable trade principles (Mullins, 2005).
Financial restructuring-
The financial structure and accounting system of Virgin Group is uneven. There is no
consolidated accounts exist for the group, holding groups and their supplementary. This type of
financial system is not useful for business. Based on the performance of financial system of
Virgin companies, it shows to be the most discouraging part of the business. Branson argued that
all his trade reserves are financed but various instances are observed where money is various
companies are managed without proper accounting. In order to ensure continuity, it is
recommended that there is the need of most structured and centralized accounting system within
the Group (DuBrin, 2013).
Business consolidation-
In order to ensure that business will survive without believes and values of Branson,
Virgin group must consolidate the investments in terms of assets and income. Branson should
consolidate assets and finances. It is also recommended that Branson must dissociate from small
businesses and focus on the advantageous businesses such as ICT and telecom. It is also
recommended that Group should fine-tune its products and services and retain its trade name
gainfully. By doing this, Virgin Group will be able franchise its brand to various profitable
businesses and minimize the risks in the business operations. Further, Branson should focus on
the centralized and systematic management structure that is universally acceptable. Along with
this, he should also be ready to provide to all the in service controls of his business and be keen
to combine liquid and substantial reserves in the business (Wheelen & Hunger, 2011).
Conclusion
From the overall analysis of the given case study, it can be said that Mr. Richard Branson
is not being an ordinary entrepreneur. It is observed that he has also set world record in terms of
managing the vast business. Although, there are various critics about the business but by
focusing on organization and management style, the business can be diversified effectively.

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There are some industries i.e. transport business, financial services, and beverage and cosmetics
industry which must be divested by the group so that the brand image of the group can be
maintained. Apart from this, there are some core resources and capabilities of Virgin Group
which are the reason for the group to stay competitive in the market. By tangible, intangible and
human resources, Virgin Group has established itself competitive in the market.
References
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management practices on employees’ organizational commitment: International Journal of
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Carton, R.B. and Hofer, C.W., (2010), Organizational financial performance: Identifying and
testing multiple dimensions: Academy of Entrepreneurship Journal, 16(1), p.1.
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Elsevier.
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Sons
Ghobadian, A., (2008), Formal strategic planning, operating environment, size, sector and
performance: Journal of General Management, 34(2), 1-20

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Grant. R. M., & Jordan, J., (2012), Foundations of Strategy, West Sussex: John Wiley & Sons
Ltd.
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Management, Berlin: Springer
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press
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Higher Education AU
Ruiz-Palomino, P., Martı´nez-Canas, R., & Fontrodona, J., (2013), Ethical culture and employee
outcomes: The mediating role of person–organization fit: Journal of Business Ethics, 116(1),
173–188
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from http://treasureislands.org/virgin-enterpriseoff-to-geneva-to-shirk-tax/
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Pearson Education India
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Minorities in the EU, UK: Routledge