Virgin Group – Richard Branson

RICHARD BRANSONS gross(a) GROUP Problems Although certainly notorious, Richard Bransons staring(a) Group has perplexd some(prenominal) problems. In the short-term, spot overextension has become a threat since the phoner has entered multiple commercialises. Brand overextension leads to damaging the comprehensive virginal target. Since the consummate(a) brand itself is the guilds greatest asset, protecting the brand come across is critical. The vestal brand image has a connotation of value and lifestyle. Due to some another(prenominal) enunciate ventures, licenses, and alliances with different companies, the objective of the perfect(a) experience could be destroyed.Further more than, as recent becomes more global and more adaptive to individual cultures, the customer experience will certainly vary, again leading to brand overextension. For example, although the United terra firma may condone pure(a)s racy and edgy advertisements, other parts of the world, as our h ost testifies, views such material quite unequivocal and even shocking. Thus, while Virgin enters different markets, negative impacts can arise, impede Virgins brand. A back short-term problem is Virgins financial information that is fragmented, hard to locate, and even interpret.With the companys different alliances and joint ventures, questions about the financial health of the Virgin group were macrocosm asked. Thus after examination, Virgin faced financial challenges that light-emitting diode to negative cash flow. This was mainly due to the Bransons approach of stand-alone basis where the most profit fit companys revenues financed new market entrances. disdain some advantageous areas of Virgin, many did not generate cash. Therefore, as Virgin grows, a more systematic approach must be apparatused to create synergies between businesses. Long-term problems overly exist for Virgin.First is Bransons close affiliation to Virgin. What happens if the public tire of his exploit s? What will happen to Virgin when Branson 1 leaves? An implication of these questions is that Virgin needs Branson. Virgins unanimous brand is fortified by Bransons own personal values. A second long-run problem for Virgin is the companys itty-bitty formal structure and management system. Although this structure presently kit and caboodle for Virgin, allowing the company to be viewed as entrepreneurial and innovative, in the long-term creativity must be managed at Virgin. Company Analysis After analyzing Virgin by dint of various analytical frameworks including internal/external analysis, SWOT analysis, and value range of a function analysis, we arrive at discovered the importance of Virgins strong brand and diversification strategy. In sum, Virgins strongest capability is the companys strong brand. The brands foundations of entrepreneurship and eccentricity result in Virgin being a strong customer-oriented company. Since the Virgin brand is so strong, the company has been a ble to diversify into many new markets.Diversification for Virgin is made possible by joint ventures and strategic alliances that are ultimately less risky. Thus the Virgin brand leverages Virgins resources. Furthermore, Bransons values are revealed in the Virgin company. The brand image, which is the motor of the company, results in innovative start-ups that keep Virgin both successful and sustainable. Alternatives To continue Virgins success, we have set several resources. First, Virgin could go public thereby gaining additional bully that could be used to fund new start-ups.The disadvantage with this alternative is that Virgin would be forced to abide by formal accounting rules, which Branson states he does not favor. Furthermore, Virgins brand could become diluted since the image would move towards a more traditional stance. 2 A second alternative is that Virgins management could designate Branson s successor and prepare that person to take on the task of CEO. The advantage of this alternative is that the fate of Virgin is not attached to Branson alone. This could help separate Branson from the Virgin brand that allows Virgin to flourish as a company, and not however an extension of Branson himself.Additionally, new leadership could prove beneficial for Virgins long-term success, and namely deciding Virgins structure. However, Bransons absence could also weaken the brand in the short-term. Since the public easily identifies with Bransons traits as loyal and fair, customers could perceive Virgin negatively. To thwart such sign negativity, Virgin could slowly implement the new successor, allowing him or her to also ravish in the spotlight alongside Branson. Thirdly, Virgin could dispose of unprofitable companies.This integration would result in money saved and the creation of a more formal organizational structure. Therefore, across the board, Virgin would be able to have a more uniform decision processes. Consolidation would also quieten investors since the corporate structure would be less complex and financial data more readily available. The motives for diversification are growth, risk reduction, and profitability. If Virgin cannot achieve those goals through the diversification strategy, then there are no reasons wherefore Virgin should keep unprofitable companies.Focusing on related industries would then reach Virgin expertise and thereby creating both value for shareholders and exploiting economies of scale. Furthermore, Virgin could assign resources among the firms more efficiently, giving Virgin better future strategy formulations. 3 Recommendations One must analyze Porters essential tests that that acknowledge the attractiveness test, cost-ofentry test, and the better-off test, to determine whether a diversified strategy has a sustainable competitive advantage.Because Virgins strong brand is firmly insert in the companys corporate structure, the attractiveness test reveals that manythough not all (example is t he unprofitable Virgin Money) of Virgins diversified companies are attractive. Secondly, costof-entry must be considered. For Virgin, many entry be are feasible, because profitable Virgin companies support the new start-ups. And thirdly, the better-off test shows that new companies within Virgin must be profitable and add value.Although many new companies do not add financial benefits, the new companies do add brand value. Thus the answer to the question whether Virgin is a successful diversified company is clearly yes. Overall the diversification works quite well. However, we do recommend that Virgin exit the unprofitable industries and consolidate. This would be beneficial in the short-term as capital immediately becomes available. Furthermore, this would also help Virgin in the long-term as only profitable companies remain, allowing Virgin to increase revenue.In looking at Virgins long-term success, we recommend that Virgin continue its short-term strategy of further developmen t expertise in key areas. Thus, long-term market saturation would be avoided, while also maintaining Virgins strong brand awareness. Despite Bransons strong presence, we also suggest that Virgin slowly implement a successor. Virgins brand is about constitution then the company needs a strong focal point. As public are not immortal, the slow implementation of a new personality could also capture the publics attention. 4 5