Managing Strategy: Virgin Group of Companies - Assignment Example

Managing Strategy: Virgin Group of Companies Section A: Question 1 Basically, the Virgin Group of Companies comprises of a wide range or mix of businesses. Over the years, the company has managed to diversify its service and product portfolio by establishing its presence in industries such as travel, retailing, information and communication technology, healthcare, financial services and fashion. Currently, Virgin has over 300 branded companies operating in about 30 different countries around the globe. Grant & Jordan (2012) observe that, companies operating under the Virgin group brand are linked through a complex and intricate network of parent-subsidiary relations comprising of several companies referred to as “holding companies.” It is therefore worth examining, the resources and capabilities that link across the corporate portfolios that have made the company such a success. This section will focus on identifying the resource and capabilities of the Virgin group of companies and subsequently evaluate them using the VRIO framework and the Resource-Based View model. Resources and capabilities Basically a company’s resources and capabilities play a critical role in determining the strategy that the company employs (Grant & Jordan 2012: 111). Virgin has a considerable number of resources and capabilities that have come into play in the formulation and implementation of its strategy. According to Grant & Jordan (2012:114) resources are the valuable assets that a company owns whereas capabilities are what the company can do competently. Grant and Jordan further categorise organisational resources into; tangible, intangible and human resources. Based on the information depicted in the provided case study, it is evident that one of the key tangible resource that the Virgin Group of Company has is financial security particularly in relation to cash flow, capital value and borrowing capacity. Some of the intangible resources that Virgin capitalises on include; the company’s brand name, reputation, a corporate culture linked to the personality of Sir Richard Branson. Moreover, human resource is also a significant resource for the Virgin Group of Company. In the case of the Virgin Company, Sir Branson’s leadership is the key resource that links Virgin’s expansive corporate portfolio. On the other hand, some of Virgin’s key capabilities include; product and service innovation, brand management, customer service and responsiveness to market trends. VRIO framework The VRIO framework provides an insightful approach of evaluating whether the internal resources and capabilities of a company promote its competitiveness in the market (Barney, 1991). Foremost, using this framework, the question of “value” imposes an evaluation on whether the identified resources and capabilities of the Virgin Company are valuable or help the company to realise value. From the provided case study, it is evident that the resources and capabilities that link across the corporate portfolio at Virgin are valuable to the company and significantly help the company to realise value. For instance, the company’s capabilities in brand management and customer service have over the years helped the company to differentiate itself from competitors in the market and subsequently helped the company to gain customer trust and loyalty. Similarly, tangible resources in form of cash flow, capital value and borrowing capacity have helped the company to explore opportunities, expand its portfolio and competitive presence in the global market For instance, in 1996, due to its financial ability Virgin Travel Group acquired Euro-Belgian Airlines to Virgin Express (Grant & Jordan 2012). Secondly, the question of “rarity” imposes an evaluation on whether the identified resources and capabilities of the Virgin Company are unique particularly amongst its competitors. Based on the case study, it is apparent that some of the capabilities and resources that link across the corporate portfolio are not necessarily unique however, others are distinctively unique. For example, in the industry that a number of Virgin businesses are based, there are competitors with strong brand names and capabilities in brand management and product innovation. For instance, following the launch of Virgin Cola in the market, the consumption of the drink in the market dwindled with time due to intense competition in the market. It is plausible to argue that Virgin Cola did not perform well in the market due to the presence competitors with strong brands and product innovativeness such as Coca Cola and Pepsi. Thus, Virgin’s capabilities may not be necessarily unique. Conversely, some aspects of Virgins resources and capabilities may be unique. For instance, Virgin’s leadership and brand name are unique. Thirdly, the question of “imitatability” imposes an evaluation on whether the identified resources and capabilities of the Virgin Company can be imitated. Virgin’s key resources such as brand name, reputation, product innovation and leadership are unique thus are difficult to imitate. Therefore, in this case Virgin has a competitive advantage over its current and potential competitors in the market. However, capabilities in customer service and brand management are susceptible to imitation from competitors. Lastly, the question of “organisation” imposes an evaluation on whether the company is effectively organised such that it is able to exploit or capitalise on the identified resources to its advantage. A critical look at the provided case study shows that Virgin epitomizes a well-structured company that efficiently and competently utilizes its resources and capabilities to provide value to its employees, customers and shareholders. For example, using its financial resources and capabilities in customer service and products innovation, Virgin Atlantic pioneered a wide range of innovative customer service offers that involved inflight massages, aromatherapy, hair styling and limousine home pick up services. Resource-Based View theory According to this theory, a company’s competitive advantage in the market is dependent on its application of different valuable tangible and intangible resources and capabilities that are at the company’s disposal. Henry (2008: 126) observes that a resource-based view model focuses on a company’s internal resources and capabilities in developing effective strategy so as to realise a sustainable competitive advantage in the industry. Based on this model, the internal resources and capabilities determine the strategic choices of the company and are used to realise competitive advantage. Grand & Jordan (2012:116), observe that as compared to tangible resources, intangible resources such as brand name and reputation can be more valuable in helping a company realise competitive advantage in the market. In the case of Virgin, the company’s brand name and reputation is the most valuable asset. The company capitalises on its brand name by branding its diverse products and services and diligently focusing on the development of brand equity rather than focusing on short-term profits. Therefore, based on the Resource-based view model, Virgin’s strategy is viable and effective (Grand & Jordan, 2012). Influence Virgin’s resources and capabilities on its choices of businesses A critical look at the provided case study, it is evident that, Virgin’s resources and capabilities significantly determines its choice of businesses within the corporate portfolio. For example, Virgin’s capabilities in product and service innovation, brand management, customer service and responsiveness to market trends has caused the company to venture into businesses that illuminate the company’s core strengths. For instance in 2004 Virgin Digital pioneered the launch of online music store that enabled customers to download their favourite music online. Similarly in 2007 the company responded to market trends by launching the Virgin Health Bank. Virgin is also known for venturing into service based businesses such as travel, wireless phone services, retail among others due it strong capabilities in customer service (Grand & Jordan, 2012). References Barney, J.B 1991, “Firm resources and sustained competitive advantage,” Journal of Management, vol 17, no 1, pp. 99-120. Henry, A. 2008, Understanding Strategic Management, Oxford University Press, New York. Grant, R & Jordan, J 2012, Foundations of Strategy, John Wiley & Sons, West Sussex, UK. Section B: Question 3 Richard Branson’s leadership style is a reflection and projection of his values and personality. As explained in trait theories of leadership, there are several traits consistent with leadership which help to predict leadership in various situations. Richard Branson as a person is carefree, adventurous, enjoys challenges and shows an affinity for informality and a dislike for conventions. Therefore, his leadership style can be described as charismatic and transformative. He is unconventional and non -conformist as shown by his decision to quit formal schooling at a young age, to sign the Sex Pistols- a group which had been shunned by major record companies-to Virgin Records or his bold decision to venture into air travel with Virgin Atlantic which was seen by his peers at the time as a risky move due to the capital intensive nature of the industry. Similarly, several features of the Virgin group and its management style which make it distinct or different from competitors or the archetypal multinational corporation can be attributed to Richard Branson’s personality. The lack of a corporate head office as well as willingness to do business from anywhere is a demonstration of his carefree spirit and how he has projected his dislike for convention and conformity to the organization. As also shown in the case study, his hands-off style to management involves investing a lot of trust in his managers by giving them the autonomy to manage the various businesses (Grand & Jordan, 2012). Branson’s leadership style is also consistent with transformational leadership. Branson’s style can be described as innovative and revolutionary as he has consistently sought to dispel conventional business management practices and principles such as putting the customer first. Transformational leaders such as Branson are not afraid to experiment with management approaches which other large corporations are wary of or to depart from the prevailing management practices and principles. For instance, Virgin Group companies are staff- centered or people driven (as opposed to product or service-driven) as demonstrated in his business maxim “staff first, then customers, then shareholders.” Transformational leaders such as Branson place high expectations on their employees and instill self confidence in them. He has also shown a commitment to a philosophy of risk taking, constant innovation and openness to new ideas which have seen the Virgin Group expand into numerous business lines such as travel, books, games, mobile telephony and even space travel. This can also be attributed his personal desire to combine the advantages of having many small businesses which would draw strength from their unity (Grand & Jordan, 2012). Potential Strengths and Weaknesses There are both potential advantages and weaknesses to Branson’s transformative and innovative leadership style. A major strength of this approach is that transformational leaders are able to motivate their employees more effectively. By allowing their employees to be creative and informal, such leaders are able to tap into the creativity of their employees or staff who will not be hindered by risk aversion. The organizational culture is one that fosters innovative practices which often translate to high performance and productivity as the employees are intrinsically motivated. An organizational culture that recognizes each employee’s input values their contribution provides meaningful work and in turn ensures a high level of commitment to the organization’s goals. For example, by giving managers autonomy to run Virgin Group businesses backed by incentives such as equity stakes, Branson ensures that each manager is committed to the growth and profitability of the organization. This approach is more effective than other motivation strategies in motivating the employees of the Virgin Group as intrinsic motivation is less costly and sustainable (Grand & Jordan, 2012). However, a management approach such as Branson’s may also compromise the effectiveness of the organization. An organizational culture with high autonomy and a philosophy which fosters risk taking may sacrifice prudent management and introduce laxity into the workplace. This may be in the form of over-ambitious risk taking that might translate into losses if the organization’s resources are not used efficiently. A hands-off style of leadership may also result in unclear and undefined organizational goals especially during times of crisis. During times of crisis, businesses need strong and visible leadership with unambiguous goals to steer them back to productivity. By allowing managers autonomy over the businesses, the Group may lack direction in such times (Grand & Jordan, 2012). The influence of Branson’s leadership on Virgin’s organisational culture From the provided case study, it is apparent that Sir Branson’s ideals, values, personality and leadership style significantly influence Virgin’s organisational culture. Grand & Jordan (2012) note that Branson’s approaches to leadership and management is greatly reflected in the company’s organisational structure. Basically, Branson’s style of management is often characterised by informality and disregard for conventions. Thus it is plausible to argue that the corporate culture at Virgin is not conventional instead, it is flexible and dynamic. Moreover, Branson’s value for fun, creativity and excitement is evident in the company’s business portfolio which integrates a wide range of products and service offers that exemplify Branson’s values. For example, Virgin’s business portfolio incorporates fun activities such as the Virgin Earth Challenge, Virgin Festivals, Virgin Games and Virgin Experience Days (Grand & Jordan, 2012). Furthermore, Branson’s hands-off approach to leadership has over time led to the development of an organisational culture where different roles are delegated and employee are given the autonomy to become creative and innovative. In addition to this, Branson’s leadership style has cultivated a people-driven organisational culture as opposed to product or service-driven organisational culture (Grand & Jordan, 2012). References Grant, R & Jordan, J 2012, Foundations of Strategy, John Wiley & Sons, West Sussex, UK. Read More