WEEK 15 - VIRGIN GROUP

Differences between corporate level strategies and strategic business unit level strategy.

Corporate level strategy

It refers to a strategy that acts as a single strategy for the whole company that is related with the overall purpose and scope of the entire organization. It tends to occupy the highest level of strategic decision making. It also covers the actions that deals with the firm’s overall objective and is active in acquisition and allocation of resources. Its strategic decisions are based on value orientation, conceptualization and being less concrete. (scribd.com, 2010)

Business unit level strategy

It refers to the strategy involved in different businesses having different strategic business units. Here, there are various businesses ad each business is treated as a single SBU. Different business with different products needs different strategies.

Corporate level strategy	Business unit level strategy
Corporate level strategy refers to the strategies taken with consideration to the complete organization as a whole - single unit.	Business unit level strategy refers to the type of strategy that helps businesses compete and struggle for success in the market. It has various strategic business units.
The decisions affect the whole organization and are related to the firm’s overall purpose and scope.	The decisions affect only a single SBU.
Top level makes the decisions.	The business level or mid- level makes the decisions.
It is concerned with high level of acquisition and allocation of resources.	It is concerned with best utilizing the resources by the help of SBU self- made decisions creating strategic advantages
It requires one single strategy to operate the whole organization.	It requires different strategies for different product groups.

                                                        

2. Discuss the Corporate Parenting style of Virgin group.

There are various sectors of products and services enlisted under the Virgin Brand like – airlines, music, holidays, mobiles, travel, etc. this organization has more than 200 companies working under the shed of Virgin with its low parental control management style. This company performs really well and the main reason would be flexibility, decentralized power and shared beliefs creating belongingness within all the employees.

The reputation of this brand is considered as a synonym to Mr. Richard Branson, the founder. The success of this entire empire is due to its corporate parenting strategy – every business it has is under one brand name, support, management, styles,etc and this helps create a consistent perception on the customer mind set.

They had benefitted in various ways when it come to the parenting style. From purchase of raw materials to finished products, mass production has helped them lower their marginal cost and increase revenues. They added value through branding, expert ideas, joint venturing and innovation.  

CASE STUDY - VIRGIN GROUP

1.      What type of corporate parent is Virgin (portfolio manager, synergy manager or parental developer)?

Virgin Group is more of a Parental Developer type of corporate. Along with an impressive brand image, it also has various SBUs. There is Virgin Travels, Green Fund, Virgin Earth, Virgin Wines, Virgin Radio and many more. It also has a strong brand emphasis and adds value to their business creating huge opportunities for their investors. All in all, Virgin Group has been enjoying the perks of having a good brand value accompanied with its positive and beneficial brand reputation.

2.       How does the Virgin Group, as a corporate parent, add value to its businesses?

The brand name and the branding strategies have always been beneficial for the Virgin Group and it has been the source of value adding for the firm. This Group has created a very strong customer loyalty base that has acted to be successful in holding the current customers and also encouraging them to purchase without hesitation. It has such a strong market value that the customers hardly doubt about the brand while purchasing.  They are selling their diversified products all under one name so the advertisement or promotion costs are very low and since the market is familiar with the brand, even new products get good response in the initial phases.

 “Brand was the single most important asset of the company” (Rob .A, n.d,.)

As a corporate parent it has been adding value to its business through various ways and some of them are listed below:

1.      Good understanding of institutionalized markets.  The good expertise and understanding of the competition and everything has created a level of positivity for the company. The management team is very good at identifying the complacency in the market and this has helped them to add some value to their business.

2.      As mentioned earlier, its brand name. as we all know, brand name gives an ultimate stamp for any product and a brand as famous as the Virgin, obviously adds positive value to the business.

3.      Limited risks through joint ventures. Many companies who are into Virgin groups have fewer risks as a joint venture and have huge advantage. Similarly, when a company does a joint venture with Virgin Group, ultimately adds value.

4.      Easy and not restricted management. Virgin group has a flat structure and this type of structure is very helpful in boosting innovations.it gives enough authority for the staff members to feel responsible and motivated. Its structure provides flexibility as well as a feeling of shared values among all the employees creating a feeling of belongingness.

5.      Innovation.  This company has senior staff that are very qualified with successful careers and when this company recruits, it acquires similar or like-minded people as partners in ventures who can match their ability to innovate as well as differentiate. Most often positive results are resulted when the collective thoughts and ideas are applied in the business directly.

3.      What is the logic of the portfolio? Why do you think they are in mobile telephony, travel, financial services, leisure, music, holidays and health and wellness?

source:
https://www.google.com.np/search?q=virgin+group&source=lnms&tbm=isch&sa=X&ei=bjpaUpiDCY_JrAesy4CwCg&ved=0CAcQ_AUoAQ&biw=1024&bih=499&dpr=1#facrc=_&imgdii=_&imgrc=epg9BiwA9PWeaM%3A%3B4ZdZ0AeFET2v_M%3Bhttp%253A%252F%252Fmkfca.wikispaces.com%252Ffile%252Fview%252Fvirgin_mind_map.JPG%252F282881630%252F684x548%252Fvirgin_mind_map.JPG%3Bhttp%253A%252F%252Fmkfca.wikispaces.com%252FVirgin%252BCompany%252BList%3B640%3B512

   The main logic behind the portfolio is a proper balance and adjustment of profit and loss. Portfolios helps to solve the problem of unbalanced risks that may arise of that exists in a business. Some of the businesses might have higher risk and higher return whereas some may have lower risk lower return and portfolios help to balance this. It acts as a helping hand when the investor is trying to invest in a business by suggesting them to invest in various types of businesses rather than a single business with maximum risk. This can be done through a diversified portfolio. The BCG Matrix, Directional policy, Parenting Matrix and many more help businesses manage their portfolios.

In order to minimize the risk of a business falling apart, virgin Group is involved in different sectors such as telephony, travels, financial services, etc. we all know that business follow a cycle and if a company is booming at present, it will decline in future. So, in order to diversify the risk and minimize its effect and also maximize the profit and distribute its loss, Virgin Group is associated with many businesses.

4.      What are the main risks facing Virgin Group as a result of their strategy? How might they be reduced?

The main risks and challenges of virgin groups are:

-          Extensive Portfolio: It has to many a large number of businesses and any inaccuracy might lead to huge risks for the whole Group as here, one affects the other.

-          Brand over reliance: this company is fully brand oriented as its main strength is its brand image. And there are many instances where this has not proven very helpful for the company. The VIRGIN ATLANTIC- this airline industry proved to be so dangerous by 2001. This was the source of maximum profits of Virgin and due to the loss in this one particularly, the whole company started bearing huge losses.

Now, the risks can be reduced by the help of the following points:

-          This Group should become less diverse as the brand has become diluted.

-          They should make certain changes in their strategy. They should change the policy to accommodate both joint ventures and independent ventures to rely upon the profit made on short term basis on few of its businesses for the sake of raising capital.

       (prezi.com, n.d,.)

References

  Prezi, n.d.,. [Online] Available at:  http://prezi.com/8sste0n94sa7/virgin-group-case-study/, [Accessed on October 5, 2013]

Rob Abdul, n.d.,. [Online] Available at: http://www.robabdul.com/the-virgin-group-case-study.asp, [Accessed on October 3, 2013]

scribd, 2010. [Online] Available at: http://www.scribd.com/doc/12456190/Corporate-Parenting-Fundmentals [Accessed on October 5, 2013]