Market Analysis of Virgin Group - Essay Example

? Topic: Virgin Group Market Analysis Report The report below looks into the Virgin Group of companies in its positioning in the market as well as analyze the strategies which are used in gaining a competitive advantage in the industries its companies and subsidiaries are operating in. the Virgin Group is a big brand name and this is a report of the strengths, weaknesses, opportunities and threats that the company experiences in its operations. It is a multinational company and hence the worldwide market it operates in has a cluster of different dynamics that influence its operations. The introduction looks into the history, base and growth of Virgin Group, as well as gives a brief of the subsidiaries of the group that operates in the world. The founder, Richard Branson plays an overseer role in the running of the company having started by simply founding a student’s newspaper. The inspiration that was generated here and hence forth is unimaginable as it has created a multi-billion empire of companies. A SWOT analysis is done based on the company’s operations and the environment with which it runs its business. The competitive nature of the environment drives the company to not only deliver innovations to the consumers but as well offer reduced prices for its services such as air transport hence gaining a competitive advantage over other big market players. The brand name not only gives the company the reputation associated with quality but also places the company at a position to give high standards of service delivery. This report also discusses the competitive model as put forward by Michael Porter in tackling competition in the business world. The strategies used to implement strategic change in the assumption of effective management. Managers need to strategize market moves that are essential in the management of market dynamics as well as evaluate the direction taken by a company such as Virgin Group as this is an important tool in the forecast of the future position of the company. Finally, the report highlights the key areas that need improvement and the recommendations to ensure the necessary loop holes are sealed for successful penetration of major markets that enhance revenue collection. Introduction Virgin group is a London; Britain based multinational private company that deals in business sectors such as trains, finance, trading, media, music, telecommunication, traveling, entertainment, cars, retailing, publishing, clothing and cosmetics with a lot of subsidiaries in UK, USA, Australia, South Africa, Europe, and Asia. Its CEO, Sir Richard Branson started the business in 1970 and now his empire has more than 250 companies and is organized into layers of holding companies, employing over 25,000 people with its main marketing activities dealing with producing, marketing, providing services and retailing around the world in over 200 companies. The CEO was born in England and as young as 17 his career had already started off as he founded a student magazine ‘Voice of Youth’ and his career culminated when he founded Virgin in 1970 as a mail order record company. What followed later was a success story of the wealthy Sir. Richard Branson as 1984 / 85 Virgin Atlantic, Games, Vision, Cargo and Holidays were launched, 1987 / 88 Virgin Records, Balloon and Broadcasting were launched, 1989 Virgin Vision sold to MCEG, 1992 Virgin Music Group was sold to EMI 1995, Virgin Direct and Cola were launched, 1996 Virgin Express, Trains and Virgin Net were founded, 1997 Virgin Rail Group Limited was established, 1999 Virgin Active and Virgin Mobile were launched, 2000 Virgin Blue was launched and 2002 Virgin Mobile was launched. This endless list shows the trail of success that the Virgin group has been able to achieve over the years and the net worth is built in diverse businesses all under the Virgin brand as the CEO does not to immerse himself in a new venture until he understands the ins and outs of the business. Virgin employs the type of structure and people usually associated with conventional companies as they deliver a quality service by empowering and training their employees to think young as this has enabled expansion through the creation of additional legal entities, giving people a sense of involvement with and loyalty to the smaller unit to which they belong. Main body Internal Audit – Strengths & Weaknesses The greatest strength of this company is the existence of a strong brand name that is recognized world over associated with a billionaire owner Richard Branson. This plays the main advantage of giving it a competitive edge in terms of getting new clients against its competitors as the gr group is far less integrated than other big groups which make them more flexible compared to others. The association with Branson as well makes the group have a high budget as well as investment which can pay for the required quality of labor and services production and offer a choice for every customer. On the other hand, the group’s weaknesses includes a diluted image after the introduction of Virgin Trains and Virgin Credit Card as well as being viewed as a rebel company that always sides with the consumer. The Virgin brand has for the most time been associated with young people, and due to its expansion as well as a mixture of different businesses seem to produce image problems to the company. External Audit – Opportunities & Threats Virgin group has not fully expanded its services to exhaust the required market especially Australia and this it can do by competing with other airlines that have established the same market and create impacts in its lower pricing. With the resources the group has, it has the room to offer something fresh as it can invest in the research and development of new products to offer its market base while at the same time reducing costs. Though Virgin group has diversified its businesses all over the various industries it operates in, it can however be noted that it is not a leading brand in any of its operations. In its flights, electricity, music, cola and other ventures, Virgin was never the market leader and it maybe a monopolistic company internationally recognized but some of its products are not due to the availability of other substitutes to its products. When it comes to new innovations, the Virgin group cannot be said to have introduced a new product but creates a product similar to an existing product and sell it at a lesser price or offer a variation to it. A strong brand is not brought about by a strong business but by a strong name and identity or something which only the brand can offer which is not the case with Virgin Group. Taking a deeper look at the management of Virgin group, it has minimal management players, no bureaucracy, a tiny board and no global headquarters which is not an ideal way of managing a multinational company. Michael Porter's Five Forces Model According to Hill & Jones, (2013), this model provides a basis for analyzing the competitive position of a corporation as it gives a simple perspective and criteria to look at focusing on the existing competitive rivalry between suppliers, the threat of new market entrants, the bargaining power of buyers, the power of suppliers and the threat of substitute products. Alongside the SWOT and Pest tools of analysis, this model gives a simple and clear insight of the position of the corporation in understanding the competitive environment which it operates in, (Hill & Jones, 2004) Taking a closer look at Virgin Group, the competitive rivalry that the group faces in terms of new entrants into the existing market are curbed by the low prices of the products and services it offers. Virgin Group has generated enough strength to be viewed as a monopoly in its major markets especially in Britain. Buyers are hence not in a position to get a better bargain for their money as the best deals are already offered by Virgin Group that incorporated the best of quality of services and products. Virgin has not had strength in terms of innovativeness and hence the availability of substitutes for the products and services it offers are counteracted by the high quality offered. The group is in a financial position that enables it employ the necessary qualified staff to give the best of the production line due to its deep pockets. PEST Analysis Another analytical tool closer to SWOT is PEST, which is an acronym for political, economic, social and technological factors affecting an organization as these factors are often useful in assessing the market for a business organizational unit, (Bensoussan & Fleisher, 2013). This tool is also useful in understanding market growth/ decline and also the position as well as potential and a direction for the business; thus it is a measurement tool that principally describes the macroeconomic factors in the organizations immediate environment and helps in identifying the changing factors affecting the organization, (Slamanig, 2013). Political analysis; principally, virgin group is a leading branded venture capital organization and one of the world’s famous and respected brands. It was started in 1970 by Sir Richard Branson and to date it is a successful business in mobile phones, travel, financial services, media, music and fitness among others. Due to the globalization of the organization, the brand is spread across a wide geographical area and across many countries. These countries have political systems that influence the organization either positively or negatively; the political structures may have trade barriers or taxation systems that are likely not to work for the organization. This include issues like taxation system, political polices and political influence to the organization among others, (Grant, 2013). Economic analysis; since virgin group is a global company, any global factors negatively influencing the world’s economy is also likely to influence the organization. For example, the 2008-2009 economic crises negatively influenced the organization. The prices of commodities suddenly went up, living standards went high and the individuals or consumers purchase power went down. In return, the organization sales decreased resulting in losses in some of its branches across the globe. However, virgin group had the capacity to absorb and minimize the risks in the organization through the global branches, (Nelson & Quick, 2005). The major economic challenge to the organization is the intense competition in their investment industries because there are many organizations offering the same services and for fairer prices. Presently, the global market is in the verge of recovering from the economic crisis and hence the global economy is slowly picking up and positively influencing the organization’s performance, (Elearn,, 2005). Social analysis; this is often about the consumer behavior and purchasing power. The consumer demand is often influenced by factors like cultural norms and hence a foreign country with different cultures and lifestyle trends, consumer attitudes and opinions choosing a product offers a potential challenge on the products sales. This calls for the organization to focus on advertising strategies, publicity and law changes likely to influence the social factors. The brand, company and technology image plays a vital role towards the social factors affecting the consumers regarding their purchasing power. The social factors include issues like religious beliefs, superstitions and cultural believes among others. They generally influence the perception of the individual towards the products and serves and hence their purchase decisions, ("Environment business", 2004). Technological analysis; this analysis relates to the technological factors influencing the business organization as the organization needs to invest in new technologies and techniques in order to maintain the market standards. The organizations performance in relation to technology, legislation, technology access, licensing and patent rights among others directly influence the organizations performance. Virgin group due to their diversity in investment industries needs to adopt new technologies and techniques in order to maintain the market momentum as well as boost their competitive edge. In order to sell their products, they need to be knowledgeable on the consumer trends like use of internet mobile applications and social media (facebook, twitter etc.). These aspects are rapidly changing and hence the need to be technologically up to date. Evaluation According to Hill & Jones, (2013), a strategy is a set of related actions that managers take to increase their company’s performance as they make efforts in penetrating new markets. Virgin group has had a successful strategy in pricing lowly as compared to its competitors and this has generated a brand name for the company. It makes sure that the necessary products are available in the market, although similar to what other companies are producing, at reduced costs. The other major strategy that the corporation uses is the maintenance of a big brand name that is well known throughout the world, (Roney, 2001) Although these strategies have been successful so far, they have their shortcomings in that if the Virgin brand name suddenly takes a turn for the negative, all the businesses that rely on the goodwill generated by the name will go under in an increasing pace. The pricing strategy has also the downside of undermining quality with time as the consumers get used to the same product over and over. They will soon need a change and hence they will exercise their ability to diversify their purchasing points. Virgin is also a prestigious brand associated with the young and this has the potential to drive away the older generation. Virgin Group has been bright enough to diversify its investments in nearly all sectors of the transport industry as well as take the initiative further to go international. This is a brave move that secured its pool of resources in various markets. The collapse of a single market will thus not affect the other markets that much and hence the corporation has high chances of survival. Conclusion Thompson, (2012), agrees that strategy leaders behind airline competitors might be similar but the leaders behind each management team are quite different. This is why there are big players in the same industry that Virgin Group has penetrated but at the same time they share a quite substantial part of the targeted customers that fly to their various destinations. The company has successfully conquered various industries due to its deep pockets that enable it to plough back revenues generated from promising markets to the investment of production and supply for the markets that are not so much favorable to the products they offer. Bamford, & West, (2010), say that an analysis of the industry is possible once the industry has been defined and we gain a better understanding of the forces in the general environment affecting it. The case of the Virgin Group is in a way complicated in that the corporation has its diversified investment in nearly all the industries it can get its hands on. This proves a difficult affair though it is a strategy that the corporation has used to maintain the profitability it is associated with, (Roney, 2004) Recommendations Partnerships are a great way of expanding the existing businesses rather than copying already existing business and reducing the price to attract customers. According to Mu?ller & Becker, (2013), a company’s ability to come up with inventions and new market oriented products will give it a competitive advantage in the consumer attraction abilities. Hence for the long-term customer satisfaction, Virgin needs to come up with products and services that will keep the customers interested in what they are offering (Sloane, 2006). Morden, (2007) asserts that the nature and outcome of strategy choice and implementation will be determined by the processes of time management, risk assessment, forecasting and business planning. Virgin Group has had one of its strengths in risk assessment by diversifying its products and services into various markets worldwide which is a strong strategy though it calls for investments in management and coordination. References Bamford, C. E., & West, G. P. (2010). Strategic management: Value creation, sustainability, and performance. Australia: South-Western Cengage Learning. Bensoussan, B. E., & Fleisher, C. S. (2013). Analysis without paralysis: 12 tools to make better strategic decisions. Upper Saddle River, N.J: FT Press. Elearn, (2005). Environment business. London: Information for Industry Ltd. Environment business. (2004). Brighton, Vic.: Hallmark Editions. Grant, R. M. (2013). Contemporary Strategy Analysis Text Only SIM. Wiley. Hill, C. W. L., & Jones, G. R. (2004). Strategic management theory: An integrated approach. Boston: Houghton Mifflin Hill, C. W. L., & Jones, G. R. (2013). Strategic management: An integrated approach. Mason, OH: South-Western, Cengage Learning Hill, C. W. L., & Jones, G. R. (2013). Strategic management theory. London: Cengage Learning Morden, T. (2007). Principles of strategic management. Aldershot, England: Ashgate. Mu?ller, A. P., & Becker, L. (2013). Narrative and innovation: New ideas for business administration, strategic management and entrepreneurship. Wiesbaden: Springer Nelson, D. L., & Quick, J. C. (2005). Understanding organizational behavior. Mason, Ohio: Thomson/South-Western. Roney, C. W. J., & The Union Institute. (2001). Planning-performance dynamics in cyclical industries: A ten-year longitudinal investigation. Westport, Conn: Praeger Roney, C. W. (2004). Strategic management methodology: Generally accepted principles for practitioners. Westport, Conn: Praeger Thompson, J. (2012). Strategic management: Awareness & change. Andover: South Western Cengage Learning Slamanig M. (2013). Pest Analysis Hungary. GRIN Verlag. Sloane, P. (2006). The leader's guide to lateral thinking skills: Unlocking the creativity and innovation in you and your team. London: Kogan Page. Read More