Virgin Group – Richard Branson

RICHARD BRANSONS VIRGIN GROUP Problems Although certainly nonorious, Richard Bransons double-dyed(a) Group has feeld several problems. In the short-term, brand overextension has become a threat since the company has entered multiple merchandises. Brand overextension leads to damaging the comprehensive gross(a) brand. Since the Virgin brand itself is the companys grea examination asset, protecting the brand image is critical. The Virgin brand image has a connotation of value and lifestyle. Due to many an(prenominal) joint ventures, licenses, and alliances with other companies, the objective of the Virgin experience could be destroyed.Furthermore, as Virgin becomes more global and more adaptive to individual cultures, the customer experience will certainly vary, again leading to brand overextension. For example, although the United Kingdom may condone Virgins racy and edgy advertisements, other move of the world, as our group testifies, views much(prenominal) material quite exp licit and even shocking. Thus, while Virgin enters different markets, negative impacts can arise, hindering Virgins brand. A second short-term problem is Virgins financial information that is fragmented, hard to locate, and even interpret.With the companys different alliances and joint ventures, questions roughly the financial health of the Virgin group were being asked. Thus after examination, Virgin faced financial challenges that led to negative cash flow. This was mainly overdue to the Bransons approach of stand-alone basis where the most profitable companys revenues financed pertly market entrances. Despite some profitable beas of Virgin, many did not generate cash. Therefore, as Virgin grows, a more systematic approach must be implemented to create synergies between businesses. Long-term problems also hold up for Virgin.First is Bransons close affiliation to Virgin. What happens if the public tire of his exploits? What will happen to Virgin when Branson 1 leaves? An impli cation of these questions is that Virgin needs Branson. Virgins untouchable brand is fortified by Bransons own personal values. A second long-term problem for Virgin is the companys little statuesque structure and management system. Although this structure presently works for Virgin, allowing the company to be viewed as entrepreneurial and innovative, in the long-term creativity must be managed at Virgin. Company Analysis After analyzing Virgin through various analytical frameworks including internal/external analysis, SWOT analysis, and value chain analysis, we have discovered the sizeableness of Virgins strong brand and diversification system. In sum, Virgins strongest capability is the companys strong brand. The brands foundations of entrepreneurship and eccentricity resoluteness in Virgin being a strong customer-oriented company. Since the Virgin brand is so strong, the company has been able to diversify into many new markets.Diversification for Virgin is make possible by j oint ventures and strategic alliances that are ultimately less risky. Thus the Virgin brand leverages Virgins resources. Furthermore, Bransons values are revealed in the Virgin company. The brand image, which is the motor of the company, results in innovative start-ups that keep Virgin both successful and sustainable. Alternatives To continue Virgins success, we have determine several alternatives. First, Virgin could go public thereby gaining additional capital that could be used to fund new start-ups.The disadvantage with this alternative is that Virgin would be forced to abide by formal accounting rules, which Branson states he does not favor. Furthermore, Virgins brand could become diluted since the image would move towards a more traditional stance. 2 A second alternative is that Virgins management could designate Branson s successor and prepare that person to bestow on the task of CEO. The advantage of this alternative is that the fate of Virgin is not attached to Branson al one. This could help separate Branson from the Virgin brand that allows Virgin to flourish as a company, and not merely an extension of Branson himself.Additionally, new leadership could prove beneficial for Virgins long-term success, and namely deciding Virgins structure. However, Bransons absence could also weaken the brand in the short-term. Since the public easily identifies with Bransons traits as loyal and fair, customers could perceive Virgin negatively. To thwart such initial negativity, Virgin could belatedly implement the new successor, allowing him or her to also revel in the spotlight alongside Branson. Thirdly, Virgin could dispose of baseless companies.This integrating would result in money saved and the creation of a more formal organizational structure. Therefore, across the board, Virgin would be able to have a more uniform decision processes. Consolidation would also reassure investors since the corporate structure would be less complex and financial data more readily available. The motives for diversification are growth, risk reduction, and profitability. If Virgin cannot achieve those goals through the diversification strategy, then there are no reasons why Virgin should keep unprofitable companies.Focusing on related industries would then give Virgin expertise and thereby creating both value for shareholders and exploiting economies of scale. Furthermore, Virgin could allocate resources among the firms more efficiently, giving Virgin snap off future strategy formulations. 3 Recommendations One must analyze Porters essential tests that that include the attractiveness test, cost-ofentry test, and the better-off test, to determine whether a modify strategy has a sustainable competitive advantage.Because Virgins strong brand is firmly embedded in the companys corporate structure, the attractiveness test reveals that manythough not all (example is the unprofitable Virgin Money) of Virgins diversified companies are attractive. Secondly, co stof-entry must be considered. For Virgin, many entry be are feasible, because profitable Virgin companies support the new start-ups. And thirdly, the better-off test shows that new companies within Virgin must be profitable and add value.Although many new companies do not add financial benefits, the new companies do add brand value. Thus the answer to the question whether Virgin is a successful diversified company is clearly yes. Overall the diversification works quite well. However, we do recommend that Virgin exit the unprofitable industries and consolidate. This would be beneficial in the short-term as capital immediately becomes available. Furthermore, this would also help Virgin in the long-term as only profitable companies remain, allowing Virgin to increase revenue.In looking at Virgins long-term success, we recommend that Virgin continue its short-term strategy of further developing expertise in key areas. Thus, long-term market saturation would be avoided, while also main taining Virgins strong brand awareness. Despite Bransons strong presence, we also suggest that Virgin slowly implement a successor. Virgins brand is about personalityindeed the company needs a strong focal point. As reality are not immortal, the slow implementation of a new personality could also capture the publics attention. 4 5