The Virgin Group

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Group 8: 09IB-046 09IB-047 09IB-048 09IB-049 09IB-050 09IB-052

RavikanthVazrapu Rohan Agrawal Rohit Chadda Saahil Juneja Sahil Bansal Shalabh Gupta

ë
 ] Introduction ] Owning Pattern ] Group Structure ] Management Sutra ] Growth rationale ] Corporate Results ] Corporate Rationale ] Relationship of strategic nature between businesses ] Virgin Group as a Corporate Parent ] Threats and their Solutions

  ] One of UK·s Largest Private Companies, annual turnover 5 billion

Euros ] Created more than 300 branded companies worldwide ] Has 50,000 employees, 30 countries ] Brand Revenues > 18 billion USD ] 96% UK consumers are aware of Virgin brand ] 95% are aware of Sir Richard Branson as founder ] Closest associations are ´funµ, ´innovativeµ, ´daringµ, ´successfulµ

Ôhe irgin
roup irgin Ôravel irgin Atlantic

irgin Rail

irgin Cinemas

irgin Publishing

irgin
roup

irgin Music

irgin Ôrading

irgin Direct

irgin Records

irgin Megastores

irgin Holidays

irgin Net

irgin Radio

irgin Enterprises

irgin Aviation

irgin Money

EMI irgin Music

irgin Clubs

irgin Balloon

irgin Mobile Ôelecoms

irgin Digital Studios

irgin Cosmetics

irgin Rail

irgin Cinemas

irgin Media

a  
 ] 1970 ² founded as mail order company & grew in music publishing &

retailing ] 1986 ² floated on stock exchange with turnover of 359 million Euros ] Compliance with rules, short-term profit deadlines pushed back into

Private Ownership ] Grew fast & profitable as an international company ] No financial results consolidated ] No ´groupµ as such

   
] Virgin Group is ´a branded venture capital houseµ ] Each business is ´ring fencedµ ] Tied only by a degree of shared ownership & importantly

shared values ] Equity vs. Ability to Expand ] Long term growth vs. Short term profits

   
] Opaque structure due to Private Ownership of Group ] Almost wholly comprised of private companies ] ´Keiretsuµ organization ] ´Loosely linked autonomous units run by self-managed teams

using common brand nameµ ] Philosophy - After critical mass, spin a new business out of an

existing one ] Dec 2003 ² Public offering of Virgin Blue



  ] ´Sutraµ is to ] Decentralised decision making ] Low cost at Head-office ] Autonomous business-level decision making ] Responsible for own development

] Sir Branson ] Involves only in marketing & promotion ] Personal style of Management ] Seeking ideas from employees ] Stock options, bonuses, profit sharing & promotion wherever possible ] Importantly ² employees are accountable for performance

  

] Virgin to represent ´being a virgin in every businessµ ] Fierce External Diversification strategy ] ´Brand is single most important asset of the company & so make it

a global oneµ ] Joint Venture ²Virgin provided Brand, Partner provides Capital ] Ex: Virgin Mobile built by forming partnerships with existing

operators

  

] Research w.r.t. offering something truly different ] Extend Brand at a low cost into selected areas to shake up a

relatively static market ] Be the customers· champion ] Start Greenfield projects in ´institutionalisedµ markets ] By 2008, Group has started more than 300 new companies &

work on Risk-Reward model

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  ] Mixed Results of failure & sheer success ] Virgin Atlantic vs. British Airways ] Virgin Blue ² low cost Australian success ] Brussels based Virgin Express lost money ] Virgin Clothing was shut in 2000 ] In 2003, Virgin Cola & Virgin Vodka merged into Virgin Drinks ] Shaky future of Virgin Rail

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  ] Sold Virgin Music ] Sold 49% stake in Virgin Atlantic to Singapore Airlines ] In 2001, sold Virgin Sun to First Choice (their rival in holiday

business) ] ´Start companies from scratch, make it a success & sell it for

a profitµ



  
 ] Into Telecom in Europe ] Into Financial Services in USA ] JV with Sprint in USA ] Public offering of Virgin Blue (Australia)

Î
 ] åhat is the Corporate Rationale of Virgin Group?

=


] Virgin·s corporate rationale is merely a projection of Sir

Richard Branson·s own personal philosophy. ] The management aims to being known as the ´customers· championµ. ] As for corporate bureaucracy its significance in the Virgin Group is very minimal. ] Sir Richard Branson adopted a ¶hands-off· policy with his managers and by doing so, encouraged their own initiatives.

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] The management recruited carefully selected individuals to

be innovative people, pioneers in their field, and to have the competitive streak in their personalities. ] The key emphasis was in innovation and differentiation ] The Virgin Group·s rationale is to diversify into as many markets feasible, and extend the Virgin brand name further at a low cost; where stature could be relied upon to reduce barriers to entry into static markets. ] Ô

    
  
 



  
  

  


Î
 ] Are there any relationships of strategic nature between

businesses within Virgin portfolio?


 

  ] All the business in the Virgin Group is strategically targeted

towards a ´five pillarµ empire system. ] è

   
 
 



 


 




 

 
 
 



 
 

µ. ] Brand was the single most important asset of the company ] O
 


   
 



 


 
     
 


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Î
 ] Does Virgin group, as a parent, add value to its businesses? If

so how?

|  
 ] The diverse aspect of the Virgin Group allows for more ] ] ] ] ]

consumer and investor confidence. Understanding of institutionalized Markets Virgin brand name to overcome barriers to entry Limiting Risk in joint Ventures Management are not restricted Fosters Innovation

Î
 ] åhat are the main issues facing the Virgin group and how

should they be tackled?

Ô 
 ] Single greatest asset & threat is the Virgin Brand ] A bad sub-brand might affect other sub-brands & parent brand ] Very diverse offerings => High Risk of effect of each other ] Virgin Atlantic vs. Virgin Rail ] åhat ´after Bransonµ? ] Each business is ´ring fencedµ and long term v/s short term profits

  ] Ensure business units perform their operations in a way that

inculcates the fun, trust and quality that is associated with Virgin. ] In the longer run, however, Branson will have to put in place a strong succession plan and fill the corporate head office with executives who are able to understand and execute the Virgin Charter. ] The Virgin Group should change its policy to accommodate both independent and joint ventures to rely upon short-term profits on a few of its businesses for the sake of raises capital

  ] Every effort should be made to bring in line the accounting

year end date for all businesses in the Virgin Group to be on the same date. This shall aid towards providing a better picture of the health and wealth of the empire. ] Release the ¶ring-fenced· policy so that important revenue making Virgin Atlantic can be bailed out during the low times.

Ô  ´My interest in life comes from setting myself huge, apparently unachievable challenges and trying to rise above them...from the perspective of wanting to live life to the full, I felt that I had to attempt it.µ