Virgin Group: On Business Management Implementation

Virgin Group: On Business Management Implementation

 

            The challenges brought about by the dynamic changes and challenges in the global marketplace affect business organizations in any immediate ways possible.  With these, corporate management develops various mechanisms to do away with the adverse effects to the business performance. An effective business management in all aspects of the organization is the most relevant solution to such changes and challenges. It is a fact that every company of each industry aims for the ultimate leadership in every portion of their field. 

In the same manner, Virgin also has this objective in mind, to be the most well-known name in each of its major industries while generating superior and consistent financial performance. Virgin is one of the most respected brands and now becoming the first global brand name of the 21st century ( 2006). The company is involved in various products and services ranging from planes, trains, finance, soft drinks, music, mobile phones, holidays, cars, wines, publishing, bridal wear and others.  What ties all these businesses together are the values of the brand and the attitude of the people within the organization. 

This study includes the analysis of Virgin group overall management activity. Specifically, it will discuss the planning and decision making, human resource, finance, and marketing functions within the company. Also, an analysis of the company’s internal and external aspects will be provided. This research also includes the strategic practices of Virgin that enabled their success. The concluding part of this paper will contain recommendation for the areas where they are seen to need improvement.

Company Profile

           The Virgin group is a family of businesses with a shared brand, all of the companies run independently. Often, the companies are set up as joint ventures with other partners, so they all have different shareholders and boards.

            The company started when  launched a national magazine called Student during the 1970s, at the age of seventeen. The proceeds or profits of this magazine were used to launch a discount mail-order record company. A postal strike started to affect this business. He then opened a record shop in London’s Oxford Street. He started building a recording studio in Oxfordshire through the profits from these businesses. It was then that Virgin Records was launched. A young musician by the name of  was the first to sign and release an album from Virgin Records. The release of Tubular Bells by  ensured the success of the record label. Virgin leapt in where major record labels feared to tread when they signed the Sex Pistols in 1977, and controversy was never far away. On silver Jubilee Day 1977,  and the band spat out their venomous version of ‘God Save the Queen’ on a pleasure cruiser on the River Thams opposite the House of Commons. Police boarded the boat and arrested the band’s svengali, . Such could be considered as one of the setbacks that the company faced.

            The color red and the name Virgin are linked in the minds of consumers the world over. Virgin devotes a lot of time to ensuring that exactly the right red appears on this publicity material, its trains, its cola cans and its company vans.  Ensuring that the correct shade of red is used, so that consumers can instantly identify a Virgin company or a Virgin product, is so important that the company produces an eighteen-page guide to ensure ‘Virgin Red’ links all the company’s activities.

           New projects quickly followed: nightclubs, film and video distribution, property development, hotels and an airline. Today, the company operates in US, Europe, Africa, Australia, Caribbean, Asia, and Middle East comprising a total of over 200 outlets. Virgin also employs over a total of 25,000 people. The total revenues around the world in 2002 exceeded £4 billion. 

 

 

ORGANIZATIONAL PLANNING AND DECISION MAKING

            The ongoing success of Virgin is not possible if not for the ingenuity of the concept of their vision as a team. The aims of Virgin in making a difference in their area of operations are succinct. Organizational planning and decision making are extensive processes. Virgin uses the forward planning technique. Forward planning ( &  1992) provides an opportunity to ask the questions-where are we? how have we got here? and what are we here to do? This kind of planning helps the management in establishing a set of organizational or functional objectives to provide depth to the mission statement and reflect the diversity of the company’s responsibilities. These describe the intent and the purpose of the organization.

The Virgin Group management plans and decides through the integration of risk-taking and research and development (R&D). Risk-taking is among the applicable techniques used by the management. It has always been an integral part of any business operation ( 2001, ). Risk is perhaps one of the extenuating perspectives when  started expanding the Virgin Group people know during the 70s. With a favorable economy in 1960s when young people enjoyed numerous opportunities in education, employment, and lifestyle, he founded a magazine named “Voice of Youth.”  was only seventeen years old then, and the initial success of his magazine made him to take the risk of going into sale of records. Despite lacking capital to start this new business,  pursued to carry on. Of course, the route towards success wasn’t a smooth one for him. Up to now, risk-taking serves as an imperative technique of Virgin in winning the marketplace battle of innovations.

In relation to risk-taking, Virgin’s every venture is based on hard research and analysis ( 2006). The company management focuses on R&D. Typically the industry is reviewed and the Virgin considers the consumer’s point of view. The fundamental questions ( 2006) asked are:

      Is this an opportunity for restructuring a market and creating competitive advantage? 

      What are the competitors doing? 

      Is the customer confused or badly served? 

      Is this an opportunity for building the Virgin brand? 

      Can we add value? 

      Will it interact with our other businesses?

      Is there an appropriate trade-off between risk and reward? 

Virgin’s dedication to their continuous research makes them the leader in the growing industries despite of stiff competition. Forecasting also regulates the planning and decision making or taking of the governing bodies. Forecasting is a rational function in the business conditions ( 1990, ). 

Further, the company has minimal management layers ( 2006). The management proliferate familial organization rather than hierarchy. They do not recognized bureaucracy as evident with the presence of a tiny board and absence of a global HQ. There is a free flow of affairs and cooperation among other companies. Information are originating in diverse sources. In terms of planning and decision making, various elements are contributed by all sections f the management. Thus, it provides a wide array of resources. The principle of communalism, sharing of ideas, values, interest, and goals are considered as real and tangible formula of success.

 However, this decentralization of the organizational structure is among the weaknesses of Virgin. This is also part of the difficulties that Virgin is facing.  Virgin considers this strength but the researcher considers this a weakness because of the decentralized leadership of the company. Due to the many subdivisions of the Virgin, there is also the difficulty in the controlling mechanisms. This slows down the production because of the need in giving reference to the other board members and directors. Virgin will also have a difficulty in finding out what division is accountable for the possible pitfalls.

 

MARKETING

            As a business organization operating in various locations worldwide, Virgin’s marketing is consumer-focused. It is apparent by the fact that every major and minor decisions and plans created or implemented are based on the result of researches conducted and founded on the parts of clients. Furthermore, the services and products are something better, fresher and more valuable.

            Further, Virgin bases its pricing strategies on several key trends that continuously shape the global marketplace. One particular trend was developed by  himself, in what he called “premium-tization”. This phenomenon causes the polarization of different markets. This would then trigger the consumers to demand and pay much higher prices for perceived quality. However, discounting in prices is also simultaneously taking place, therefore squeezing out the middle range. More often than not, businesses undergo internationalization which leads to a tighter squeeze for shelf space. So  thought that this will in turn leave the Virgin group as a winner. It is for this reason why Virgin group values the “premise sector” so much because this would allow consumers can to try their brands at low risk and price.

 also theorized that segmentation was a key factor especially in markets where a broad leadership position has yet to be fully developed. So in these markets Virgin group later on strived for strong positions especially in the premium and specialty segments. Good examples here include Virgin group’s leading position in the airline industry as well as in the recently established mobile stores in the United States as well as in Europe. Virgin group has been showing steady signs of growth and progress in the airline industry for a couple of years now. This consistent progress can be attributed to the change in strategic directions that was implemented several years ago and is still being further structured up to now. Basically, the critical element of the theory of  was to start looking at things from the perspectives of the consumers and the customers. In both examples,  proved that his theory to establish autonomous growth through the selling of more and more brands and expansion through the distribution networks as well as growth through acquisitions can be stunningly effective.

In terms of the e-commerce culture, Virgin maintains a competitive edge in delivering ‘old’ products and services in new-fangled ways. The company’s proactive and quick implementation of actions makes them more effective and ahead of others.

Advertising is another outstanding feature in their marketing strategies. It is the paid communication through which relevant information about the product is conveyed to potential consumers ( and  2001). In a general sense, advertising is being utilized to be able to impart to the consumers the availability of a particular product or service. In a way, advertising is also able to provide critical information regarding the product or service. When an advertising campaign is achieved effectively, this can lead to an increased demand for the product. Virgin’s advertising strategy also plays a major part to its growth. Through adapting to the culture of their target market as the main tool of their advertisement, the company brought their products and services within the reach of the masses.

           

HUMAN RESOURCE

It is said that the philosophy of human resource management (HRM) is based on the simple belief that human resources are the most important asset in achieving and sustained business success. This realization became the driving force behind the creation of human resource management resulting in organizations taking a strategic approach to the management of their people.

 

The true worth of human resource management is becoming more widely understood as human resource management steadily interweaves all aspects of people management and development within the company ( 1995;  2001). The principles of HRM are widely and effectively utilized by the Virgin’s management. From HR planning, selection, recruitment, training, rewards and motivation, and other aspects of employee management, the company remains liberal and bounded on sole perspective. This is evident with the more than 25,000 number of diversified employees in all its outlets worldwide.

 

Virgin is also able to develop talented people throughout the group. New ventures are often directed by people and seconded from other parts of the company’s trademark management style, skills and experience. They frequently create partnerships with others to combine skills, knowledge, market presence, and so on. Contrary to what some people may think, Virgin constantly expanding and diverse empire is neither random nor reckless. Each successive venture demonstrates the skill in picking the right market and the right opportunity.

As previously stated, there is no bureaucracy within the limits of the company. Thus, employee and management can air their concerns and views with regards to the overall functioning.

 

FINANCE

            Aside from the existing financial resources of Virgin Group, it is very interesting to delve into the joint venture strategy in accumulating funds. Joint venture typically entails forming a new corporate entity owned by the partners, whereas strategic partnerships represent a collaborative arrangement that usually can be terminated whenever any one of the partners so chooses ( 1996).  As what was said by  (1996), most joint ventures have involved two partners, and, historically were normally formed to pursue opportunities that were somewhat peripheral to the strategic interests of the partners. Very few companies have used joint ventures to diversify into new industries central to their corporate strategy.

            Accordingly, in recent years, strategic partnerships and alliances have replaced joint ventures as the favored mechanism for joining forces to pursue strategically important diversification opportunities because they can readily accommodate multiple partners and are more flexible and adaptable to rapidly changing technological and market conditions than a formal joint venture ( 1996). 

            As a broadly diversified firm operating in over 30 countries worldwide, Virgin’s Group had been making mergers and acquisitions, while on other cases, forming alliances and partnerships as strategic actions to keep abreast its global operations. These made the company strengthen its international market position and these also opened numerous opportunities for competitive advantage. This serves a stable and consistent source of the company’s finance. 

 

OTHER CORPORATE STRATEGY

            The company’s reputation as a leading and respected industry in its specialized operations, there are other notable factors to consider in its success. The power of the Virgin name; ‘s personal reputation; the unrivalled network of friends, contacts and partners; the Virgin management style; the way talent is empowered to flourish within the group ( 2006) are considered vital attributes of its competitive advantage.

Furthermore, all the markets in which Virgin operates tend to have similar characteristics. These markets are composed of customers that have been ripped off or under-served, where there is confusion and/or where the competition is complacent. In this case, Virgin is able to break into and shake it up.  The role of the company is to be the consumer champion, and doing this requires delivering the brand values and company strategies to the clients. Virgin’s brand values and company strategy focuses on: Value for Money, Good Quality, Brilliant Customer Service, Innovative, Competitively Challenging, and Fun ( 2006).

            Virgin is a broadly diversified industry. It is deemed that a company is diversified when it is in two or more lines of business (. 1996). It is obvious that it is certainly more difficult to craft and execute a strategy in a diversified firm rather than in a single-line business. In fact,  &  (2003) had suggested that concentrating on a single line of business has numerous significant advantages. Undiversified firms can achieve enviable success over many decades like the cases of renowned companies such as Coca-Cola, Apple Computer, Xerox, Federal Express, McDonald’s, and Ford Motor Company.

            However, with the constant technological innovations, changing needs and tastes, and new substitute products, it is not unusual for companies to transform their business operations in diversified way.  Many had suggested that diversification depends partly on a company’s growth opportunities in its present industry and partly on the opportunities to utilize its resources, capabilities, and expertise in other market pitch.  This applies to the case of Virgin Group when  continuously aimed for the company’s expansion. 

Another is the opportunity that Virgin takes advantage is their greater market share as seen on the numerous patents registered by the company.  This enables them to have the top of the line products only to their name and therefore would lead costumers only to them for they could not find any of the said services and products in other brands.

RECOMMENDATIONS AND CONCLUSION

            Deriving from the analysis between the industry, operations management and capabilities of Virgin Group, many strategic options would become imperative. It is therefore essential to evaluate these strategic options as to whether they are appropriate to the issues addressed, whether they are feasible enough to be implemented and their acceptability to key stakeholders.

In organizational planning and decision making, there is definitely a need to reconcile both the inside-out and outside-in capabilities. While Virgin Group’s operations management involves focusing on its core competencies with market position following its resource base,  and his company will be put into a disadvantageous position should they choose to neglect both the macro as well as the industry environment. Therefore, Virgin Group has to be aware of the latest operations management changes, as well as changes in political, economic, legal and even demographic trends in order to develop the outside-in capabilities, such as market sensing, customer linking, channel bonding and technology monitoring.

The advantages enjoyed by Virgin Group may come in the form of increased revenues. Knowing what the market demands and the latest trends could help the company fully exploit its R&D capabilities to come out with services which are not only cost-effective but also high in quality. The strategic option can even be used as marketing tool where the focus is on staying close to their customers and listening to their feedbacks. On the flip side of the coin, there will be huge mobilization of resources involved, and the associated risks bestowed on Virgin group.

Nevertheless, the mentioned strategic option seems the most practical in the wake of globalization, since there is a sudden shift towards a more integrated and independent world economy. The key stakeholders too should not have any objections so long as Virgin group’s core business is not threatened. By virtue of ’s centralized control of its business, it is being expected that major barriers should not exist in carrying out such an option except additional time may be required given the scope and span of operations.

Understanding the strategic importance of operations management is something that Virgin Group has to be familiar with.  normally practices a centralized and globally scaled configuration of operations and capabilities. This allows information dissemination to be retained.

            There are many factors that contribute to the success and perhaps the minor setbacks that the Virgin Group faces.  What brought them to success is the fact that they consider, not only the amount of profit they make, but also the satisfaction of the customers. On the other hand, the company must still also consider a more centralized structure. This is not to surpass their view of a non-hierarchical structure as effective. Through a more centralized structure, the management would be able to have more control of their resources, hence consider a better output.

 

 

REFERENCE

 

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