CASE 16 - VIRGIN GROUP

3. What criteria should Branson apply in deciding what new diversification to pursue?

a. Businesses where the core capabilities can create value b. Brand name and innovative service ideas i. Should they follow the current customer group into the next stage in life? Retirements homes? c. Industry attractiveness i. Assess the potential options according to how viable they are ii. Structure ready for profits and synergies toward core capab.

6. KEY TAKE AWAYS

a. Corporate level resources and advantages in Virgin group: Due to low relatedness one may argue that they have little in common b. In order to analyse conglomerates like this we need to understand the common resources between the unrelated firms i. Virgin Brand ii. Business development capabilities iii. Dominant logic is the business model and entrepreneurial growth capabilities c. Address the scope of the company i. Find the recommendation to divest and investment strategy d. From capabilities and resources we can address i. Organizational structure ii. Management systems iii. Leadership style appropriate to the corporate strategy

5. What changes in the financial structure, organizational structure, and management systems of the Virgin group would you recommend?

a. First i. Identify current structure and strategy ii. Very low common structure today iii. No shared services or links iv. Informal corporate structure b. Possible actions i. PROTECT VIRGIN BRAND 1. Unclear who own the Virgin trademark 2. Ensure control to let the trademark stay sharp and brand identity true and consistent ii. FINANCING OF COMPANIES 1. Possible to lower cost of capital through more efficient shared services 2. Create e.g. single holding company 3. Do IPO of most capital extensive company iii. ENSURE MANAGEMENT CONTROL 1. Ensure formal management control of Virgin 2. Better corp control of the group 3. Set up good strategy 4. Risk of losing entrepreneurial spirit and culture 5. Maybe M-Form?

2. Which businesses, if any, should Branson consider divesting?

a. Simple answer: bad performing businesses b. Problematic though due to i. PRIVATE COMPANIES 1. Hard to get financial info ii. PAST PERFORMANCE AS INDICATOR 1. We cannot judge future performance based solely on old data 2. Most of the ventures lost money inititally, which is natural 3. Still, turn around strategies can be initiated iii. INSTEAD 1. Consider what businesses that best utilizes the core competencies and resources? 2. What potential does the Virgin brand have on value adding? 3. What characteristics does Virgin's common resources have? 4. Examples a. Consumers businesses b. Start-up businesses - Branson good in building new companies c. Companies with novel ideas in customer service d. Businesses where the incumbent players have lost its sharpness, Branson good in being innovative - David Goliath scenario iv. SUGGESTED DIVEST 1. Rail Service - Not startup, monopol 2. Cola drinks - Innovative competitors 3. Designer clothes 4. Biofuels

1. What common resources and capabilities link the separate Virgin companies?

a. The Virgin group and case is mainly an example of corporate strategy, close linkage with the Virgin name b. COMMON RESOURCES & CAPABILITIES i. Virgin Brand ii. Richard Branson 1. Reflects the values of risk taker, entrepreneur, anti-establishment 2. Honesty 3. Value for the money 4. Innovation in customer service iii. Business capabilities of the Virgin group iv. Brand management v. Promotion capabilities vi. Partnering capabilities 1. JV 2. Alliances

4. What is the Virgin business model?

a. Virgin businesses portfolio - connect to the identity of Virgin group and their core values b. Ideas i. BRAND LICENSING ORGANIZATION 1. License the name of the Virgin group to other products and industries 2. Could be hard due to close connection between Virgin and Branson ii. VENTURE CAPITAL ORGANIZATION 1. Provide capital to startupts 2. Could be good due to innovative reputation 3. Seek ideas from outside to finance 4. Branson great at identifying opportunitites iii. DIVERSIFIED CORPORATION 1. Diversify in related and unrelated businesses like GE did iv. NETWORK ENTERPRISE 1. Link all above