Journal Entry (Week 14)- Virgin Group

Questions

1. What type of corporate parent is Virgin (portfolio manager, synergy manager or parental developer)? 
2. How does the Virgin Group, as a corporate parent, add value to its businesses? 
3. What’s the logic of portfolio? Why do you think they are in mobile telephony, travel, financial services, leisure, music, holidays and health & wellness? 
4. What are the main risks facing Virgin Group as a result of their strategy? How might they be reduced? 

Virgin, a Parental Developer

Virgin is a parental developer. It seeks to employ its own competence to add value to its businesses. In the context of virgin, it uses its strong brand name as a promise of good value on each business the group enters into.

Synergy manager transfers capabilities between its business units. However, parental developers use their own resources and competence to enhance the potentials of business units.

Portfolio managers manage portfolio of businesses. However, Virgin varies from portfolio managers because they have the authority to intervene and introduce changes unlike in portfolio managers.



Value adding activities

Some of the value adding activities are:

• Brand image 

Virgin is an internationally respected brand. As stated in the case study, when virgin gives its name to a new business, it promises along quality, innovation, value and customer satisfaction. This brand image is a result of Richard Branson’s high profile.

• Flat Management structure 

Empowerment of each business unit to run their own affair, authority to device solutions for problems in the group depicts common goal, value and shared interest. This allows for continuous growth and autonomy.

• Diversification, creating partnership and joint venture 

Virgin has reduced its risk by partnering with others and combining skills, knowledge, and operational expertise from a range of industries to build exciting and successful companies.

Virgin group's Logic

Logic behind portfolio is determined by understanding which SBU's to invest in. Virgin targets businesses in growing phases. Let us view the Logic behind Virgins portfolio with the help of BCG and GE matrix

Major Risks for Virgin group

Financial Safety Net:

Virgin previously seemed to rely on the profits of Virgin Atlanta, it's airline company. It made profits of GBP 60 million in fiscal year 2008/09. However, due to deregulation and increase in competition ( British airways), it reported loss of GBP 132 million in 2009/10. Hence, it is essential to understand that these industries are cyclical in nature meaning even such industries face loss at times.


Empire building

Virgin Rail was voted among the most unpopular rail operator i.e. 24/25. This had serious effect on the popularity of the Virgin Brand and on the reputation of Sir Richard Brandson. The image that Virgin wanted to reflect "The best in the class" did not quiet fit what was happening to Virgin rail. Therefore it is essential to understand that just stacking up an empire in the name of a BRAND is not good enough. It is essential to live up to the expectation of what is promised to be offered because public opinion is a delicate matter.


References:
About Virgin, Virgin.Available at: www.virgin.com/about-us [Accessed on 1 March,2013]

Virgin Atlantic confident of prospects despite big FY2009/10 loss, CAPA center for aviation. Available at: http://centreforaviation.com/analysis/virgin-atlantic-confident-about-future-prospects-despite-big-fy200910-loss-32681 [Accessed on 2 March, 2013]

Virgin history, Virgin.Available at: www.virgin.com/virgin-history [Accessed on 1 March,2013]