Virgin corporate strategy Case Study - by Rob Abdul

Introduction
This report closely examines the Virgin Groups corporate strategy / rationale and identifies the
relationships namely of strategic nature within the Virgin Empire.
Virgins value adding qualities shall be discussed and the main issues faced by Virgin shall be
identified and categorically solutions recommended respectively.
Corporate Rationale
The Virgin Group comprises of an assorted mix of businesses. It has its finger in every pie, so
to speak. The Virgin has group diversified into 200 businesses. Please see Figure 1 below:

Figure 1 The Virgin Group

Sir Richard Branson, founder of Virgin in 1970 is in the authors opinion the single most
important ingredient to all the success that has been reaped up-to-date. As the saying goes you
reap what you sow thus, corporate rationale is merely a projection of Sir Richard Bransons own
personal philosophy, which he has sown into the fabric of corporate rational. A personal
philosophy and a personal persona that is revered and respected by the British public and
beyond.
Sir Richard Bransons high profile already won over the general public and almost anything he
would pursue or was associated with would be given the benefit of the doubt. Thus the word
Virgin and Sir Richard Branson are almost interchangeable. The Virgin brand name is by far the
most important asset to the company. Being known as the customers champion inevitably has
done wonders for public relations.

This fact was capitalised on; in British advertisements for Apple Computers. Sir Richard Branson
was associated with great names such as Einstein and Ghandi, and featured as a shaper of the 20
th century.
Sir Richard Branson, tired of the public listings obligations and corporate bureaucracy sought to
take the business back into private ownership. His understandings lead him to believe that
sacrificing short-term profits for long-term growth was the way the business should be geared.
As for corporate bureaucracy its significance in the Virgin Group, was reduced profoundly. No
real sense of management hierarchy can be found in the group except for when it comes to
marketing and promotion issues, Sir Richard Branson would take a more involved role.
Therefore Sir Richard Branson adopted a hands-off policy with his managers and by doing so,
encouraged their own initiatives. By proving such freedom, managers would inevitably feel more
of a sense of responsibility, ownership and would try their up most to make a success of it. Sir
Richard Branson knew this fact. He was providing an enriching atmosphere in which managers
would flourish just as he had done. Its not surprising then, that management recruited carefully
selected individuals to be innovative people, pioneers in their field, and to have the competitive
streak in their personalities. It was also of importance for candidates to be able to share values
and to work effectively as team players. It is the authors opinion that Sir Richard Branson
employed managers who were made up of his image; in terms of personal characteristics and
persona.
The key emphasis was in innovation and differentiation. The aim was to offer more for less and
that each company was truly a Virgin in its own field. Although to some this notion may seem a
bit too good to be true, no one can deny that the Virgin Group is one of the UKs largest private
companies (with reference to the case study) with an annual turnover (estimated) at 3bn by the
year 2000.
The Virgin Groups rationale is to diversify into as many markets feasible, and extend the Virgin
brand name further at a low cost; where stature could be relied upon to reduce barriers to entry
into static markets. The Virgin Group sought a challenge in ever venture. They would aim to
provide better quality products than any competitor in a complacent market. The key point is that
the market to be entered must be still in its growing phase.
The alluring factor to Virgins Greenfield start-ups is the reward-to-risk ratio, which could be
acted upon by the experienced and capable Virgin management team.
To establish the virginity of a venture, so to speak in an institutionalised market extensive
research was conducted into the static market to derive whether some sort of niche can be
achieved and thus satisfied. Sir Richard Branson and his team deployed their 5 point criteria, to
which 4 out of the 5 must be met by a new venture before giving the final go ahead.
Strategic Relationships

All the business in the Virgin Group is strategically targeted towards a five pillar empire
system that Sir Richard Branson is eager to create. At the heart of Virgins core strategy to
develop the five pillars of the business empire: travel, leisure, mobile phones, entertainment
retailing and personal finance. (Press Releases 30/01/02,
http://www.virginmoney.com/newscentre/news2002_3.html)
As you can see displayed in Figure 1 (on page 1) all the ventures have inherited the Virgin name.
Whats in a one might ask? There answer to that question is an exceptionally well marketed,
promoted and trusted brand name. Brand was the single most important asset of the company
(Case Study Page 4, Paragraph 1)
By giving a venture the prefix of Virgin; is to send out a message to the consumer to say out loud
this new business is a virgin in its market place, fun, innovative, daring. It also has the
effect of transferring all the marketing and promotional endeavours up to the present for that
specific venture respectively.
As the author has previously mentioned the name Virgin has become synonymous with Sir
Richard Bransons name. The British public can immediately identify the roots to any Virgin
advance as Sir Richard Bransons very own. This is Sir Richard Bransons key psychological
strategy; and as you are acquainted by now, Sir Richard Branson plays a more interactive role
into affairs of marketing and promotion; because aside from his indubitable genius marketing
and promotion of the Virgin brand name is the Holy Grail to the expansion of the Virgin Empire.
Thus many businesses outside the Virgin Group have shown their interest through joint ventures.
Examples of the power of the Virgin brand name can be concluded from the various joint
ventures that have been formed. For example Virgins pledge in the Virgin Direct affair, was a
mere 15m for the initial investment. But AMP Limited the leading international financial
services initial investment was an extensive 450m; and yet it is a 50-50 joint venture!
All business within the Virgin Empire as mentioned in the Corporate Rationale section
sacrificed short-term profits to gain long term growth and used an autonomous business
level decision making method. Managers are free to make decisions independently for
growth and feel the same degree of ownership and values that any other manager in the
Virgin group would feel.
Businesses were ring-fenced so that assets could not be switched between companies in the
Virgin Group and if a company became too large another company would be spun off, in its
place.

Value Adding
The Virgin Group, as a corporate parent does value to its business. It is achieved by the following
points:

Understanding of institutionalised Markets

Virgins management team have done well in identifying complacency in the market. It is this
expertise/experience coupled with the strategy to offer more for less that has help the Group
plough through complacent business industries.
Virgin brand name to overcome barriers to entry
The Virgin brand name is a consumers champion and as mentioned previously is a much
respected brand with the British public.
Limiting Risk in joint Ventures
Any company, corporation or organisation in a joint venture with the Virgin Group has the
benefit of limiting its risk in the market place. This reiterates the point made in the last
paragraph.
Management are not restricted
A flat management structure helps encourage innovation; provides flexibility and promotes the
values of shared ownership and responsibility.
Innovation
Virgins senior staff consists of individuals with successful careers. The Group acquires likeminded partners in ventures who match their ability to innovate and differentiate.
These collective innovative thoughts and ideas are applied directly into business; which
most often bare fruit. For example Virgin Mobile formulated partnerships with existing
telecommunications operators to retail in mobile services. The Virgin management team
successfully identified that the complacency was in the handling of network management.
Their innovation led them to promote unique services that shock-up the market. These
included no line rentals, no monthly fees and cheaper prepaid offers. Irrespective of
the fact that Virgin Mobile did not actually operate it own network it had won the best
wireless in the UK.

The Main Issues Facing the Virgin Group

Virgin Atlantic
The airline industry like many industries is cyclic. This proved to be dangerous by 2001, as
Virgin seemed to rely entirely on the profits of Virgin Atlantic. Deregulation increased the
competition in the market place. All in all most compositors were experiencing losses.
Virgin Rail
The biggest problem faced by the Virgin Group was the Strategic Rail Authoritys Review in
2000 because it was the most public. Virgin Rail was voted the most unpopular rail operator;

and if that wasnt enough the statistics: Virgin ranked 23 rd and 24 th out of 25 operators, was
ample reason for Sir Richard Branson to feel a stake go through his reputation.
Slowly but surely Virgins prized brand name was being slowly chipped away by the press. The
Virgin Group being such a large empire of 200 businesses was wonderful publicity when things
were going right but all it took is for a hand full of businesses in the empire to either experience
unavoidable consequences, which is the case of Virgin Atlantic and bad service and publicity as
was the case with Virgin Rail for it to have quite disastrous effects on other areas of the group.
Public confidence is such a delicate matter.

Recommendations
Become Less Diverse
Virgin should become less diverse. Its name has become diluted and its brand a purely
endorsement brand. Lessons for the analysis of the environment must be learned. For example
brand name alone isnt enough. The pubic are sensitive and are attuned corporate strategies given
time. Virgin as a corporate parent can add workable value to its businesses by investing and
developing real expertise. Trying to limit risk is a knife that is sharp on both sides. On the one
side it inevitably limits risk. On the other hand it sends out a contradictory signal to
consumers. How can Virgin be daring when Sir Richard Bransons value adding process is to
limit risk? That is a question we should work towards eradicating.
Change in Strategy
The Virgin Group should change its policy to accommodate both independent and joint ventures
to rely upon short-term profits on a few of its businesses for the sake of raises capital and release
the ring-fenced policy so that important revenue making Virgin Atlantic can be bailed out
during the low times. Monies can be returned to the short-term ventures when the busy season
arrives. The idea is to not restrict yourself to a policy of philosophy. Philosophies and policies
should be such that can strategically change with time and environment.
Accounting Year End
Every effort should be made to bring in line the accounting year end date for all businesses in the
Virgin Group to be on the same date. This shall aid towards providing a better picture of the
health and wealth of the empire.

BHEL
Bharat Heavy Electricals Limited (BHEL) is a highly diversified public sector. Undertaking
operating in a number of business sectors: energy, industry, and transportation. Corporate
planning at BHEL follows the general pattern in other public sectors enterprises in India. Public
enterprises in the country have emerged as a part of the national planning exercises At the time of
the inception of many of the Public Sector Enterprises (PSE s),detailed feasibility reports with a
long term orientation were prepared .However, there were no built in contingency plans for
tackling uncertainties and discontinuities. When these Public Sectors Enterprises reached a stage
when the original concepts forecasts were no longer applicable as a consequence of
environmental changes, they faced enormous problems .Enterprises operating in high
technology areas and which had a high investment found it extremely difficult to cope with
changing environment .BHEL was no exception .However, it was able to overcome the problem
by adopting comprehensive corporate planning .Planning had commenced at BHEL from the
very beginning .Till 1969, planning was done with a short-term orientation .The real efforts in
the direction of long-term planning were started during 1970-71. It was during this period that
an Action Committee consisting of various PSE s including BHEL. The committee suggested a
reorganization, including the merger of Heavy Electricals India Limited (HEIL) with BHEL An
analysis of the corporations strengths and weaknesses, and the opportunities and threats that
were present in the external environment was undertaken and a detailed action plan was
developed for achieving rated capacity .Beginning in 1973-74 efforts were made to built systems
for comprehensive planning, programming and budgeting. A Corporate plan was developed and
circulated among executives. Initially, revenue budgets for each division were prepared for twoyears so as to achieve linkage between short-term and long-term plans. Frequent discussions
were held, functional and cross-functional committees were appointed for achieving integration
between head office and the divisions. The organizations structure was changed to transform the
company from manufacturing orientation to an engineering orientation with an increased
emphasis on marketing. A Corporate Planning and Development division was created at the
corporate level with each division having its own planning and development cell. The Corporate
Planning and Development Division was placed under the charge of an Executive Director. The
division was organized around the following groups: investment and facilities planning long
range planning, operations planning, and optimization and modeling. The investment and
facilities planning group was responsible for company-wide investment programmes.
Various activities included project formulation and appraisal, coordination of review
committees, project monitoring and preparation of annual capital projects. The long-range
planning group was responsible for environmental analysis, review and appraisal of long term
plans, review of integrating devices, transfer of technology, collaboration, subject licensing and
training. Operations planning included analysis of performance budgets, coordination of

operations, monitoring, project management studies for industrial projects, production

coordination and materials management. The optimization and modeling group was responsible
for undertaking the development of various models using quantitative techniques and studies
relating to optimal utilization and scheduling of machines and facilities, investment analysis and
energy modeling.
The role of the Corporate Planning and Development Dision could be summarized thus:
i)

Planning for modernization and expansion of manufacturing;

ii)
Development of technology management capability in the context of rapid rate of
technological obsolescence,
iii) Assisting in the development, review and evaluation of product plans,
iv) Synthesizing divisional plans and product plans into the sectoral plans and weaving them
together as a corporate plan,
v)

Introduction of contingency planning in all areas,

vi)

Improving planning capability at the divisional level,

vii) Providing assistance in the preparation of functional plans, viz., engineering plans,
technology plans, etc.
viii) Undertaking organizational studies,
ix)

Strategic management development,

x)

Monitoring of divisional performance,

xi)

Enhancing information processing capability and analysis of environmental conditions.

The Corporate Planning and Development Division was responsible for directing and
coordinating the total planning activity in the organization. But the basic inputs into the plan
were generated by the activity in the organization. But the basic inputs into the plan were
generated by the various units. Each division prepared its long term plans keeping in view its
relevant environment. Each division also developed product plans, which included an analysis of
technological gaps and action required for bridging the gaps. Based on these technology plans of
the units, a corporate technology plan was prepared which provided direction for technology

acquisition and/or development. Product plans and divisional plans were reviewed, evaluated
coordinated and integrated into sectoral plans.

The short description of the corporate planning process at BHEL provided some glimpses
into its complexities. The experience of BHEL is not typical because organizations of the nature
and experience of BHEL is not typical because organizations of the nature and complexity of
BHEL are not too many in the country. Corporate planning systems vary from organization to
organization depending on a variety of factors: environmental conditions, organizational size and
complexity, age, top management values and styles, initial trigger for the commencement of
planning, etc. Variations in the corporate planning systems across organizations may be found
first the top doing corporate planning. These approaches may be any of the four types: top-down
approach, bottom-up approach, hybrid between top-down and bottom-up approaches, team
approach.
Firms adopting this approach plan at the top and the various departments are supposed to do
what they are told to do by the top management.
In firms adopting this approach the top management asks the departments or divisions to submit
their plains are then reviewed by the top management and accepted or sent back to the organizing
departments or divisions for modification. The consolidated divisional plans in the case of a
decentralized company may not add up to the managements targets. Additional plans are then
required to be prepared which might necessitate planning for acquisitions or diversification into
highly unrelated business areas.
A combination of top-down and bottom-up approaches is the approach which is generally used in
decentralized companies. In firms using this approach the top management provides certain
guidelines to the divisions or strategic business units (SBU). The SBUs are distinct business with
their own set of resources that can be managed in a manner reasonably independently of other
business within a firm. The top management guidelines are sufficiently broad to permit
flexibility to the SBUs in developing their plans. There is a vertical communication between the
top management and the divisions or SBUs at different phases of the planning process. Broad
objectives, policies and strategies may be arrived at through a dialogue and negotiation between
the top management and the divisional or SBUs managers.
In small centralized firms where lateral communication between the top managers is easier than
in large decentralized firms, the chief executive may himself, in collaboration with the senior
managers, prepare corporate plans. In some very large firms also this practice has been found to
exist.