Key resources connecting the separate Virgin companies
What common resources and capabilities link the separate Virgin companies?
The Virgin companies are expanded over a diverse range of companies that are included in various sectors of telephone services related to Wi-Fi, phone call plans, broadband, TV phones, IP-VPN and SIM card services provision; travel services that include airline, leisure, flying clubs, travel booking, cruise facilities, private island booking, restaurants and tour operating services; financial services like home loans, insurance, saving accounts, fundraising, health and wellness services like social care, health bank, employee wellness; music, leisure, holiday-related businesses and much more both in the United Kingdom as well as internationally. All these diverse fields of operation provide the brand name with a very complex structure. Despite of the vast dynamic spread of the operational zones, Virgin has certain common resources and capabilities link all the separate companies in to the common head of the brand(Grant, 2016).
The most common and key resource is the founder of the Brand, the developer of the company, Richard Branson. Due to his service spirit, charisma, distinct business skills that act as an entrepreneurial flair, his personality is prominent all over the world and this provides uniqueness to the company and his style replicates in all the other organizations.
The Brand name: all the different companies linked into the common head of Virgin and this faith of people in the brand name helps Virgin to prosper in all the diverse companies’ establishment and operation. This name is the common link between all the companies in various fields that automatically raise the value of the ventures. Due to the trademark name of Virgin and Branson’s celeb matter, Virgin had the capability to get 51% or more of equity of the brand new ventures while also adding equity capital in minority proportion (Bruijl, 2018).
Company structure/company society: the common approach of Branson to frame the structure of all the companies are precisely the same and they follow a similar criterion.
The links and connections in the market, recognition of the name of the brand itself, its global visibility, advertisement, and the variety used by them all form the common capabilities that link the various companies together(Henderson, 2020).
McKinsey’s 7S framework can be applied to better demonstrate the common link of the companies in terms of resources and capabilities(Demir and Kocaoglu, 2019).
The 7S that act as a common link of all the different companies include:
Figure 1: McKinsey’s 7S Framework
Source: (Osman and Anouze, 2017)
- Strategy: the overall corporate strategy of the Virgin Group is to perform like a venture capital firm based on the brand name which is then further diversified at an individual business level(Techinasia, 2022).
- Structure: the structure of Virgin is in the form of a decentralized organization, where they all have separate operation making authority that prevents bureaucracy associated with the corporations that are centralized. They all enjoy the benefit of corporate parenting as they are able to utilize the parent brand name.
- Systems: the overall system formulation of all the different operational mechanisms provides a complete interconnection network.
- Style: the style incorporated is common due to the founder of the company and his vision. The overall innovation management, operation guidelines, and other styles are the same at a broader level.
- Staff: The Company incorporates the vision of diverse workforce employment and facilitates an inclusive workplace regardless of any form of discrimination whether it is gender, age, sex, nationality, or sexual orientation(Virgin, 2021).
- Skills: The skills of Branson of being innovative, incorporating and learning new techniques, work-life balance, etc. have been uniformly incorporated among all the units.
- Shared Values: the values on a broad view including inclusiveness, the spirit of adventure, dedicated services, etc. remain the same and interlinked(Mission Statement Academy, 2022).Which businesses, if any, should Branson consider divesting?
Richard Branson has had brilliantly managed to evolve Virgin into a global giant that offers a wide variety of services including finance, telecommunication, lifestyle, traveling, airline, health and wellness, and media. It has more than 40 companies that are currently operational in 35 countries (Virgin, 2020). The current Virgin companies in operation include Virgin Active, Virgin Books, Virgin Games, Virgin Holidays, Virgin Hyperloop, Virgin limited Edition, Virgin Media, Virgin Moblie, Virgin Orbit, Virgin Money, Virgin Plus, Virgin Galatic, Virgin Wines and many more (Virgin, 2021a). However over time, some of the companies have not been yielding profitable outcomes which are tarnishing the companies’ reputation in the global market. It is necessary that the firm dis invests in such ventures to protect the other companies’ image and to save itself from recurring losses. With time various businesses have been partially or completely divested in order to release the equity that can then be incorporated into other business ventures. From the period of 1992 to 2005 Virgin has divested various businesses some of which include the music business, Virgin Atlantic which was partially sold to Singapore airlines, and various other services in the US involving the Virgin vie, cosmetics, cars, bikes, bridges, drink, money, cola(Grant, 2016).
The role of Richard Branson
Virgin Atlantic Airways Ltd. : The British airline with a primary base established at the Heathrow and Gatwick airport the company has have been into losses for a long period of time.The only profit was recorded in the year of 2015 83.4 million British pounds followed by the highest recorded profit till date in the year 2016 which was 180.9 million British pounds. Rather than these two years, it has been constantly facing losses with a peak loss of 864 million British pounds in the year of 2020(E. Mazareanu, 2022). The year was described as the toughest year in the airline history of long 36 years. However, the impact was greatly due to the ban on travel, lockdown, and the halt in the tourism industry in different parts of the world due to the COVID 19 pandemic. The passenger travel percentage dropped by 80. However, the Brand does not have any current plan on closure. They exclaim to remain confident that the business will overcome the losses and get back to the customers emerging as a sustainably profitable airline(Caswell, 2021). However, Branson also cleared the need of help by the UK government for the airline’s survival.
Virgin Galactic Holdings Inc.: The space tourism company Virgin Galactic has have been in losses for the recent quarters. The business is, however, a promising ideology as thousands of people are willing to pay a lump some amount to travel into space. In the final quarter of 2021, the company has recorded a loss of net $80 million which has accounted the company to have lost $1 billion in the past two years. The company offers the general public to purchase a suborbital space ride worth $450,000. But reports state that even despite of that the company will certainly loose a considerable amount as its expenses account to $80 million a quarter(Berger, 2022).
2. What criteria should Branson apply in deciding what new diversification to pursue?
Richard Branson has over time expanded the operation of the Virgin brand in various diverse sectors. The brand worth is contributed by various companies in different sectors. It has have been actively indulged in unrelated diversification that is getting diversified and expanded in all over new and unrelated segment areas which does not include any similarity with the other or previous occupation. It has actively taken part in various mergers and acquisitions for its diversification. The account on which the firms have been able to prosper is the analysis of the market need in demand at due time that have acted as strong potential. Branson mentions that opportunities are like buses where 1 bus is followed by another that is the opportunities are always coming along (Oakley, 2014). Hence to continue to identify the upcoming potentials for the brand to pursue diversification in, the following criteria should be put into consideration:
Figure 2: Business Diversification levels and triggers
Source: (Dhir and Dhir, 2015)
Customer Centricity: the first criteria should be to analyze the current market scenario and the need of the change to be carried. For instance, the world is suffering from the COVID pandemic. Hence the current market to support the new living in the post pandemic situation can be referred to as the market demand analysis. Identifying the problem faced by the market helps to determine the scope of the business to lay its venture or foundation to offer a vital solution. Keeping the customer centric needs and behaviors in to the key aspect consideration will relatively help the business propose a greater solution worth higher growth and profits (Schneckenberg et al., 2016).
The power of the Virgin brand name
Ambition for Innovation: the ambition behind the diversification or innovation must be set straight. Whether it is to generate greater profits, expand an operation in a geographical location, establish a new core unit or unit is to act as a support for the key activities of the brand that is the key companies. It can also be to create transformational initiatives for creating new offers and not as a new business. Often innovation ambition matrix is defined or a portfolio is created for the same purpose (Nagji and Tuff, 2015). Branson can apply the 70/20/10 formula in order to built the growth portfolio. The 70 present stands for the core growth, 20 for the adjacent market impact of the diversification and 10 present is for the things that are transformational in true means.
Resources availability: the dependence on the resource by the firm acts as a prominent criterion to recognize whether to pursue diversification or not. The resources that can be acquired or are internal to the firm include the network, connections, material resources, etc.(Ochieng, 2020)
Evaluating the brand’s capability: considering the capability of the organization to set up and expand its footprints in the market requires proper internal analysis of the capability and power it holds as a name and the amount of responsibility the organization will be willing or be able to bear.
4. What changes in the financial structure, organizational structure, and management systems of the Virgin group would you recommend?
Virgin currently is a private owned company that is funded on a standalone basis. Many reports define the financial practice of Virgin under Branson to be conservative that gives little income as the output but saves quite a lot of equity that is beneficial to set up the new businesses. The current organizational structure of Virgin is loosely framed flat organizational structure. The company does not follow any definite structure or hierarchy for which it is even criticized by some but the combined effect produced by all the companies outshines this barrier. Each of the companies is individually set up and managed using different managerial styles. No particular style is implemented within the brand entirely (Virgin Group, 2021). The group does not contain any Board of Directors and hence the decision making and strategy implementation is with Branson and other top level management appointed. This shows that Branson has incorporated a very flexible overall operational structure currently (Bruijl, 2018). However this practice has made many of the companies a victim of ‘Corporate disguise’, one such example being Virgin British Airways (Branson, 2020). Hence Virgin can restructure the financial, organizational, and management structure to observe the impact on the current especially loss generating businesses.
Changes in the financial structure will help the companies to manage the current chaos in which some of the current loss making companies are compensated against the profit earned by the others. Hence such practices have been performed to support various allied companies that are running on losses. The company should follow a greater structured financial accounting system where each operating unit identifies its financial statement and a centralized accounting is also performed to calculate the net profit or loss of the brand overall. Redefining Virgin into a formal centralized structure of the organization so that the opinions of the successors of Branson can also be formally and more legally complied by and the chaos of the group being undefined can be removed. Setting up a centralized unit for policy and strategy formulation will help to set the responsibilities right and inputs and ideas of different individuals as a team can result in more positive output for Virgin. As for the management systems, it would be more effective if different companies can select their own accord of management style and decision making either it be autocratic, democratic or laissez faire at their level (Grant, 2019). The current practice of relying on a single person’s personal beliefs and ideologies cannot and should not be taken further and the operations should be laid down on the basis of universally acceptable business principles and conventions.
Common company structure and society
5. How does Virgin add value as a corporate parent, what more could it do?
The strategy of the Virgin group is based on corporate parenting. The term ‘corporate parenting’ simply means sharing collective responsibilities of the group, the employees, and other partner agencies to look after and provide support to the new setup or child firm (London Borough of Hounslow, 2022). A corporate parent coaches, facilitates the new business operation with the existing resources and links, enlightens, and interferes to add value in the activities to the newly set up business operation. Hence the group follows a strategy whereby all the new business startups inherit and follow and share the brand name, values, resources, management style of the parent company. The parent company, Virgin Group Pvt. Ltd. was born in UK has over the period of 5 decades, build a reputation of being customer centric and offering a varied range of services. The group, today constitutes of around 500 companies and millons of employees under it(Hodgson, 2018). The analysis of the value chain added by the parent group of Virgin include the primary activities that constitute of Inbound logistics that is the design, development and research which is conducted on a high level covering all the standard services and products. The brand name of the company reduces the new entries to market. The pre created brand image in the share market helps the firm to retain its authority as a huge competitor and cut the competition by acting as barriers to new entrants. The risk associated with the creation of joint ventures with Virgin automatically lowers the risk in the market place. The wide ties and connections in almost all sectors provide greater opportunities to the firm that helps to set up new field of business operation or extension of a particular field quite easier. The brand also regulates the bargaining power of the suppiers due to the international business operation and high standards of brand image because of which the suppliers feel to be associated with the companies under the brand name, and comply with the criterias set by the company for the suppliers(Sadq, 2016).
The Virgin group can further add more value to its child companies by expanding the companies of a particular field into other countries where it already has its connections due to prior business activities. Its rational to diversify in feasible products can be applied to the new emerging technological interventions in the current scenerios. By analysing and entering in to a new market, it can stun the competitors expand the operation. It can also collaborate with the public sector rather than staying private in some of the operations. More overly it can help all the units expand by investing in the growth of the Information technology sector that will help the technological change incorporate within the units indistinctively. The brand needs to maintain its reputation by closing the non profitable units and centrally focusing the primary and non core aiding units for support and governance.
Market recognition and global visibility
6. What would be the challenges faced by a successor to Richard Branson, and what might he or she do?
A recent report released by the Virgo group known as Future Visions analyzed various key aspects that will create a grave impact on the current operating style of Virgo. The future advancements predicted in the report gave an overview of the face of the world of business in the further time period of 20 years. The report listed the following aspects that can act as potential challenges for Virgo in its future operational zone. These can also have a long term impact and a possibility can be that the successor of Richard Branson would also have to face them.
Prevalence of working from anywhere: as an impression and vision enrooted by the pandemic phase where people were encouraged to work from home or other personal confined spaces, the future is set to expand the scope of this methodology as a result of which the work place that is the offices are to be no more. This is due to the reason that technology has and will have the ability to cover all the geographic barriers and the need for offices will be restrained. The cloud based company will facilitate logging into any networked terminal around the globe.
Haptic technology: it refers to control and giving order to the machines from the brain waves. This will really bring advances in various sectors such as health care where doctors will be able to operate the machinery to perform operations from home or architects would be able to visualize the design framed in the head (Virgin Management, 2017).
Rise in the application of Artificial Intelligence technology: Branson stated that the future resides where AI will assist us in the day to day living. The prevalence of the data will be so superior that it will allow us to predict health problems, weather, and crime rates. The rise of Al will create all new challenges since it will change the type of skills required. This will also encourage greater value to female attributes such as emotional intelligence.
All these kinds of challenges that might be faced in the future will gravely impact the current manner of the company functioning and will require re-implementing or reformulating the currently held practices. As a result, the successor might do relative changes and incorporate innovation regarding the change in the practices and a flexible and tech friendly structure among all different operational businesses. Important decisions will be to consider the work lifestyle culture whether to retain the traditional methods or go with the changing pattern of the society functioning.
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