Strategic Analysis of Virgin

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1 Introduction

1.1 Company Introduction

2 Industry External Factor Analysis
2.1 PEST Analysis
2.2 Porter’s Five Force Model Analysis
2.3 Threats and Opportunities
3 Conclusions
4 Suggestions to Future Strategic Management
5 Bibliography and References
1 Company Introduction

Virgin is a leading branded venture capital organization and is one of the world's

most recognized and respected brands. Conceived in 1970 by Sir Richard

Branson, the Virgin Group has gone on to grow very successful businesses in

sectors ranging from mobile telephony to transportation, travel, financial

services, media, music and fitness. Virgin has created more than 300 branded

companies worldwide, employing approximately 50,000 people, in 30 countries.

Global branded revenues in 2009 exceeded £11.5 billion (approx. US$18 billion).

Virgin believes in making a difference. Virgin stands for value for money, quality,

innovation, fun and a sense of competitive challenge. Delivering a quality

service by empowering our employees facilitate and monitor customer feedback

to continually improve the customer's experience through innovation has been

the main objective. During a start of any new venture, we base it on hard

research and analysis. Typically, we review the industry and put ourselves in the

customer's shoes to see what could make it better. The fundamental questions

that arise for an entrepreneur who seeks an opportunity: 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?

We are also able to draw on talented people from throughout the Group. New

ventures are often steered by people seconded from other parts of Virgin, who
bring with them the trademark management style, skills and experience. We

frequently create partnerships with others to combine industry specific skills,

knowledge, and operational expertise. Contrary to what some people may think,

our constantly expanding and eclectic empire is neither random nor reckless.

Each successive venture demonstrates our devotion to picking the right market

and the right opportunity. The more important factor for an entrepreneur is to

diversify the business in order to mitigate or rather minimize the risks involved

in the business.

Once a Virgin company is up and running, several factors contribute to making it

a success. The power of the Virgin name; Richard Branson's personal reputation;

our unrivalled network of friends, contacts and partners; the Virgin management

style; the way talent is empowered to flourish within the group. To some

traditionalists, these may not seem hard headed enough. To them, the fact that

Virgin has minimal management layers, no bureaucracy, a tiny board and no

massive global HQ is an anathema. But it works for us! The proof of our success

is real and tangible. The company is a part of a family rather than a hierarchy.

They are empowered to run their own affairs, yet the companies help one

another, and solutions to problems often come from within the Group

somewhere. In a sense we are a commonwealth, with shared ideas, values,

interests and goals.

2 Industry External Factors

External factors are those factors that are not in the hands of the organization.

These factors may be dealt with little analysis, models which will help these

factors are defined in a much better way. Below I will analyze the external

factors of Virgin with PEST model and then use the Porter’s Five Force model and

the external factors-Opportunity and Threats of SWOT model.

2.1 PEST ANALYSIS

PEST is an acronym for Political, Economic, Social and Technological

factors, which are used to assess the market for a business or organizational

unit. The PEST analysis is a useful tool for understanding market growth or

decline, and as such the position, potential and direction for a business. A PEST

analysis is a business measurement tool.

2.1.1Political Analysis

Virgin is a leading branded venture capital organization and is one of the world's

most recognized and respected brands. Conceived in 1970 by Sir Richard

Branson, the Virgin Group has gone on to grow very successful businesses in

sectors ranging from mobile telephony to transportation, travel, financial

services, media, music and fitness. The brand is used in many countries of the

world. They have businesses in 30 different countries be it the best countries in

the world with outstanding quality of life, having the healthiest economies in the

world all of them have accepted the brand as a whole. However, since Virgin

may start to spread its business to some other parts the world, it has to take

challenges from political factors in other countries.

2.1.2 Economic Analysis

After the financial crisis in 2008-09, the global economy has started to recover.

People now are affordable to consume better services. The important thing what

Virgin have done is diversifying their business to minimise the risk. What the

Virgin has to look out for are their competitors in their market, as there are

many offering the same service for better prices and Virgin have to strategise

their approach towards pricing their services and products. However, with the

recovering of the global economy and with the businesses flourishing in

different countries they will share the global growth with Virgin as well

as other brands.

2.1.3 Social Analysis

As we know, purchase behaviour and consumer demand is largely driven by

cultural norms, so companies in a foreign country with different cultures,

lifestyle trends, customer attitudes and opinions choosing a product will be a

challenge. The company needs to concentrate on their advertising,

publicity, media laws and laws changes that don’t affect the social factors.

The brand, company and technology image plays an important role on the social

factors of the consumers in regards to buying the product and also the company

must have a deep understanding of cultural differences and religious factors of

the consumers.

2.1.4 Technological Analysis

The usage of modern technology is very important in this business. The

company needs to invest in the research in order to have a potential

development in the innovating a mature technology. The performance of the

company relates to their technology legislation, technology access, licensing

and patent rights that the company possess. However, Virgin could put new

elements of technologies into its development thus keep up with the world.

2.2 Porter’s Five Force Model Analysis

Michael Porter's famous Five Forces of Competitive Position model provides a

simple perspective for assessing and analysing the competitive strength and
position of a corporation or business organization.

2.2.1 Existing competitive rivalry from suppliers

Today Virgin to some extent is a large and globally economical company with a

rapid development in recent years. For Virgin to maintain their base in the

markets, have to look into expanding their base in different markets. Actually
what matters sometimes is the industry size and Virgin as an industry has

lived up to their standards. They have a wide range of products and services

flourishing in the market and have maintained their low cost strategy and

always tried to create a difference with their products. So, the growth of Virgin

doesn’t come from the competition with other companies but try to open new

opportunities in the industry.

2.2.2 Threat of new market entrants

In the telecom, travel and other industries the employees should be skilled and

try to pace themselves with the current market situations. As for Virgin they

have placed themselves well in over 30 different countries and with the

expectations of expanding to other markets will pose a threat to the existing

market holders. However, with the expertise of the experts and skilled and

experienced employees Virgin need not worry about potential new entrants in

the market.

2.2.3 Bargaining power of Buyers

Bargaining power is the ability to influence the setting of prices. Virgin has to

carefully market their products with keeping in mind the cost factor. Prices will

vary for each product and keeping in mind the competitor’s strategy Virgin have

to always create a difference in their products in order to deliver customer

satisfaction by obtaining the JIT scheduling and also have a grip on their market

holding. As a result the buyers bargaining power will not be much of a cause for
Virgin.

2.2.4 Power of suppliers

To an extent, Virgin is a large international company with a consistent growth in

rapid years. As for the suppliers the main thing is the brand reputation and

Virgin as a brand has met their standards. Virgin having their businesses in 30

different countries have always kept in mind their geographical coverage be it

in Asia, Europe, Australia, North America and Africa in order to meet the

expectations of their suppliers to ensure they have every bit of satisfaction.

Virgin have maintained their relationship with customers by providing them with

great service and have also maintained the quality level of service and product

they provide. So the supplier power will not affect Virgin in anyway.

2.2.5 Threat of substitute products

Today, with the development of science and technology especially the publicity

and advertising skills are competing with the telecom industry. As of today the

young generation have moved as a fast pace with the technology and always

want things that are beyond expectations. As a result Virgin faces a stiff

competition even though they market the products and publicize them to the

very best the end customer will have more and more expectations from them.

Virgin have to research and develop a technology suitable for customers where

they can match up to the expectations of their customers.

2.3 Opportunities and Threats

2.3.1 Opportunities

A firm’s strengths are its resources and capabilities that can be used as a basis

for developing a competitive advantage. As Virgin has had a diversified line of

businesses they have a stronger chance for improvement. By expanding their

existing business to different other countries the marketing strategies come

relatively easier for Virgin to satisfy their customers and also reach their

targets. As a result of this, Virgin will have an exclusive access to high grade

natural resources which in turn will help them develop favourable access to their

distribution networks and will also help them to maintain a good reputation

among their existing customers and also their new customers. The external

environment analysis may reveal certain new opportunities for profit and

growth. The opportunities that may lie for Virgin may be in regards to arrival of

new and upgraded technology which can help them boost their reputation

among their competitors. There may be changes or loosening in terms of

regulations and laws which would enable Virgin to grow more in a global market

with much ease and smooth. There may be a visibility of removing the

international trade barriers which would profit them hugely. All these may lead

Virgin to experience the competition with other industries thus leading them to

a competitive advantage.

2.3.2 Threats
The absence of certain strengths may be reviewed as a weakness. Virgin as a

global company who have businesses in different countries need to have access

for the best natural resources and the biggest threat for them will be lack of

resources. The other thing that Virgin needs to have access is their distribution

channels in order to maintain their customer reputation by delivering their

products using the JIT schedule, if not then this will create a bad reputation

among customers which will pose a threat to Virgin. In some cases a weakness

may be a flip side of the strength. Virgin as a firm might have a large amount of

manufacturing capacity. While this capacity may be considered as strength that

competitors do not share, it may also be considered as a weakness if the large

investments in manufacturing capacity prevents Virgin from reacting quickly to

the strategic environment. Changes in the external environment also may

present threats to the firm. Virgin have to consider the fact that the tastes of

the customer keep changing and they have to act accordingly in order to

maintain their reputation in the market as by not doing so will pose a serious

threat for the industry. However, Virgin has to establish a defensive plan to

prevent their firm’s weaknesses from making it highly susceptible to external

threats.

2.4 Conclusion

Although Virgin is a large and not a old company as compared to the telecom

and travel industry, through the analysis of various externals factors of Virgin,
we can come to a conclusion that Virgin as a company has brought in many

diversified products making themselves grow rapidly in the industry. With the

implementation of different ideas, different products and services and also

varying with their strategies and adapting to the market’s external factors has

made Virgin develop a competitive edge or rather an advantage over their

competitors. However, in the coming years with much more investments

pouring into the emerging markets Virgin will prepare themselves with

different ideas and strategies to obtain a strong hold in the current and in the

future markets.

4 Suggestions for Future Strategic Management

To be effective as a leader, Virgin must develop skills in strategic thinking.

Strategic thinking is a process whereby they learn how to make their business

vision a reality by developing their abilities in team work, problem solving, and

critical thinking. It is also a tool to help them confront change, plan for and

make transitions, and envision new possibilities and opportunities. As Virgin

develop a strategic vision for your business, there are few different criteria that

they should focus on.

Organization. The organization of Virgin business involves the people who have

been working for them, the organizational structure of their business, and the

resources necessary to make it all work. What Virgin as an organization need to

look at is what type of structure will support their vision? How will Virgin

combine people, resources, and structure together to achieve their ideal

outcome.

Views. Views are simply different ways of thinking about something. In strategic

thinking, there are four viewpoints for Virgin to take into consideration when

forming their business strategy: the environmental view; the marketplace view;

the project view; and the measurement view. Views can be used as tools to help

Virgin think about their outcomes, identify critical elements and adjust their

actions to achieve their ideal position.

Observation. When Virgin is looking down at the world from an overview, they

can see much more than when they are on the ground. Strategic thinking is

much the same in that it allows them to see things from "higher up." By

increasing their powers of observation, they will begin to become more aware of

what motivates their people, how to solve problems more effectively, and how to

distinguish between alternatives.

By working through these few areas, Virgin will begin to get a clearer picture of

exactly how their business vision can be accomplished. As their vision becomes

more focused, their ideas will appear stronger and more credible. Not only will it

be easier to convince others that their idea is a good one, but it will also be

easier to maintain their own conviction and motivation when they reach any

pitfalls or obstacles in the road.

 5 References and Bibliography

Boar, Bernard H., (1947) Strategic Planning, The art of strategic planning for
information technology.

Neef, Dale, (1959) Managing Corporate Reputation and Risk, A Strategic

Approach.

Mabey, Christopher, 1951Human resource management: a strategic introduction

http://www.virgin.com/about-us/History/Richard Branson

http://www.smallbusinessforum.com/showthread.php?6265-Forecasting-the-
Future-Strategic-Management-Thinking (Accessed on 19th April 2011)

http://www.businessballs.com/portersfiveforcesofcompetition.htm/SWOT
analysis/PEST Analysis (Accessed on 18th April 2011)