Virgin group and diversification strategies - Article Example

Introduction Diversification is responsible for introduction of more responsibilities, and the nature of the responsibilities is based on its temptation, such opportunities are responsible for further broadening of the horizon. There are different factors associated with the introduction and implementation of the diversification, and related strategies, the factors involve 'the status of the business and brands; the suitability of the brand to leap sectors; the knowledge of other markets; time and financial management; and want the customer expects from the brand will all be massive considerations, and the successful delivery of the product and customer satisfaction' (Robert, 2004). These are the fundamental highlights and observation made in the article written by David C. Court, Mark G, Leiter and Mark A. Loch regarding the adoption of the diversification strategies of the Virgin Group, the article was published into The McKinsey Quarterly, Issue No. 2. Discussion Key Concept The journal has explained that although element of risk is involved once the strategies related to the diversification are implemented; it is because at the initial phase the Virgin Group and its product are expected to be strange towards the area of specialization. Virgin Group has been successful enough to balance the risk factor with the expected rewards and remuneration. The Virgin Group is considered to be the 'brand diversification' (Robert, 2004); it has been observed that the Virgin Group has launched versified range of product and services, which incorporate all the major and expected requirements of the customers. The journal mentioned that, the analysts and critics are of the opinion that, 'sometimes it seems Richard Branson is the unofficial ruler of the world, the group manages people's finances; offer access of the entertainment to the local customers; power and offer phone services; supply the required goods to the customers including wine; and transport consumers across country, sea and soon enough space' (Robert, 2004). The authors appreciated the Virgin Group for its versatility, the wide range of services offered by the Virgin Group has made it quite popular among the masses, and Virgin Group has devised such strategies which has emphasized not only on the services to the customers, but beliefs in the value added services to the customers, they further appreciated Virgin Group for categorization of its customers into different groups, and its success in offering services of extreme variance to the customers, the aspirations and expectations of each customer has been incorporated into the diversified range of services and offers provided by the Virgin Group. Debates There is common understanding among the analysts that is 'the Virgin Group is one of those organizations where diversification has almost become a brand value in itself' (Robert, 2004). The diversification strategies adopted by the group has been responsible for the phenomenal rise in the Virgin Group's revenue, 'the sheer volume of the Virgin Group's revenues provide illustration of just how effective a diversification strategy can be in driving growth' (Robert, 2004). The Virgin Group has adopted a simple technique which is responsible for its phenomenal growth i.e. 'over-arching brand into new business areas'. It has been normally observed that when the companies are involved in different set of services, such companies launch different names for their services, however in the case of Virgin Group it's the common name which is also attributed with the success. The launch of different services and schemes under common banner has played vital role, and is regarded as crucial among the diversification strategy. It has been observed that different companies have launched different trading names, but Virgin Group has tried to refrain itself from such scheme, it has avoided the formation of different subsidiary units and companies only 'being tailored for the market in question' (Robert, 2004). Virgin Group has successfully carried out its diversification schemes and operations under common name, the Virgin Group has ignored and avoided d previous such corporate practices where 'many entrepreneurs prefer to establish new businesses as separate corporate entities or proceed through joint ventures with others'. Such scheme contradiction of the diversification proceedings, but the Virgin Group has proven it that different and diversified services can be offered from single platform instead of diversified platforms for respective scheme. It has been observed that the Virgin Group has tried to overcome the concerns and fears associated with the size of the customer base, which is the function of the growth prospects of the current business, however the diversified business activities have improved and increased the 'revenue inhibitors' (Robert, 2004). The Virgin Group has been successful in the management of the time scheme, and different units within the organization have been able to reflect coherence, therefore such diversified schemes have been successful. The Virgin Group has underwent such initiatives after it was able to verify the success of its previous schemes and units, and once it was realized that there is reasonable and unprecedented amount of demands within the market, it was decided to launch another venture. Research methods that are employed According to different reports issued in 2006, the Virgin Group launched and invented in more than '200 disparate businesses' (Walls, 2000), the market survey concluded that 'the brand virgin was one of the most known brands in the world' (Robert, 2004). The diversification strategies launched by the Virgin Group were fully supported and popularized by the Virgin Group's founder Sir Richard Branson, the authority himself generated hype among the masses and the media about the services and offerings of the Virgin Group through launch of diversified range of brands. The founder of the group has reflected exemplary leadership skills, and his personal aptitude towards the adoption and implementation of the diversified services has been encouraging and positive, therefore the group was able to enjoy the focus, attention and appreciation by the media and business circles 'for his entrepreneurship, leadership style and publicity stunts' (The Economists, 1998), further for the incorporation off such versatile schemes which were as per the aspirations of the local population. Theory of Brand Leverage According to the journal the Virgin Group has adopted the concept of Brand Leverage, where 'a brand uses the initial brand platform to move into other opportunities'. The publication has regarded the leveraging of the Virgin Group 'in quite unrelated ways, into airlines, financial services, and cola drinks', however the commonality between all the services offered by the Virgin Group has been its image of a 'fun and exciting company'. According to the published journal, initially the Virgin Group launched its services in mail order records business, and later gradually expanded its services into disparate businesses, as per the notion of diversification, it is therefore more than a surprise for the customers, which never expected that before, now the customers had different offers and schemes related to 'music retailing, airlines, beverages and more' (Walls, 2000). The diversification can not be exercised without the support of team and local employees, the administration of the virgin Group has been widely acknowledged for the positive response and attitude towards their employees and their needs, therefore the diversification of its services, which has never taken place before in that particular sector, was always welcomed and supported by the employees, the employees participated enthusiastically for the launch and development of the products and services. According to reports, 'Virgin companies were renowned for its innovative service standards, employee and customer-centric approach. Branson's personal management style encouraged risk-taking, delegation and participation. His disrespect for hierarchy led to a cordial and fun work environment' (Robert, 2004). Unresolved issues The Virgin Group has previously involved itself into different versatile operations, and some of its diversified operations were expected to be risky, however the Virgin Group was able to subjugate the risk effects, in 1990s the Virgin Group involved itself into biggest and riskiest diversification operation i.e. Virgin Rail. The Virgin Group tired to purchase the stakes of the British Railway system soon after its privatization, 'Virgin Rail was formed to bid for operating franchises in the partitioned and privatized British Rail system' (Robert, 2004). After seven years, in 1997, the Virgin Rail operated two rail companies including Virgin Cross-Country and Virgin West Coast. It also invested in London and Continental Railway, and evolved partnership with five other contenders. The detailed study of the performance report of the Virginia Train revealed that the Virgin Group was able to secure significant level of profit as compare to its others competitors, the recorded annual sales of more than '158 million, the Virgin Group invested heavily for the purchase of new trains and carriages, and has tried to offer quality and speed to the customers. It is important to understand all the projects undertaken by the Virginia group are based on adoption of efficient and effective techniques to provide superior quality services to the customers, at reasonable price. The diversity of operations and functions have been responsible for the mismanagement, and such cases have been reported in past where the Virginia Train was extremely criticized for its poor punctuality (Financial Times, 1998). Therefore in the journal, the persistence of the quality issue has not be achieved, and therefore the serious consequences have been predicted if the Virgin Group failed to comprehend and rectify the threats and shortcomings. Conclusion The authors of the journal; appreciated the Virgin Group for the launch of effective advertisements and promotion campaigns to highlight the diversified operations and programs it has undertaken, and this is considered to be the important factor behind the economic success and immense popularity of the group, although the quality of the service is criticized, but such criticism has not adversely affected the performance and progress of the group. The rapid diversification of the Virgin Group has prompted the Virgin Group administration to 'look increasingly to outside equity financing' (Robert, 2004), and therefore the Virgin Group has been able to attract investment through venture capital funds, joint venture partners, and initial public offerings. The Virgin Group has already involved itself in wide range of diversified products and schemes, but it has performed due diligence report of each investment and diversified program it has launched, therefore the defensive strategy of the Virgin Group towards the diversified program it offered has prevented the Virgin Group from any major financial debacle. The Virgin Group has evolved diversified programs, but prior to their inauguration and launch, the Virgin Group has adopted secure strategies through active participation from other investors, the Virgin Group has offered forty nine percent shares of the Virgin Atlantic to Singapore Airlines, the forty nine percent of the shares of Virgin Rail are owned by Stagecoach, similarity Virgin Retail has list of different investors and associates including Blockbuster and Marui. The Virgin Group launched Virgin Trading drinks ventures in collaboration with the William Grant and Cotts. The Virgin Group launched Virgin Express, and at the moment is the minor shareholder of the Virgin Group. The Virgin Group has adopted preventive technique, and instead of investing all of its capital toward particular subsidiary, it has promoted public and private partnership and has evolved different businesses and schemes with the support of other investors, this is considered to be the effective strategy through which maximum business opportunities can be evolved through minimum capital. Theses sets of strategies have prevented the Virgin Group from any of the major financial collapse. It was previously believed that 'with the rapid diversification of the 1990s, there was also the risk that the Virgin brand had become overextended' (Robert, 2004), however the risk has been further deterred once the public and private partnership offers received overwhelming response. 'Despite the remarkable diversity of the Virgin Group, all of the Virgin Group companies possessed an entrepreneurial culture and a strategy that was based upon novel approaches to creating value for consumers' (Journal of Commerce, 1998), and such strategies are held responsible for the success and growth of the Virgin Group. References 1. David C. Court, Mark G, Leiter, Mark A. Loch. Brand Leverage. Journal Title: The McKinsey Quarterly. Issue: 2. Publication 1999. 2. Melanie Wells. Red Baron. Fortune. July, 2000. 3. Alan Mitchell. Virgin in financing U-turn. Marketing News. April, 1997. 4. Journal of Commerce. January, 1998. 5. Behind Branson. The Economist. February, 1998. pp. 63-6. 6. The future for Virgin. Financial Times. August, 1998. pp. 24-5. 7. Robert M. Grant. Richard Branson and the Virgin Group of Companies in 2004. October, 2004. Read More