Virgin group

Résumé du document

Sir Richard Branson, the well known British creator of the Virgin Group, began to build his business by establishing the Virgin Records in 1972. Since this date the Virgin brand has never ended to grow and develop various branches, such as Virgin Atlantic Airlines, Virgin Train, Virgin Card, Virgin mobile, Virgin Radio. The main strategy of Virgin Group during these past decades was therefore to diversify its activities and to cover a wide range of industries to gain as much market share as it could.

The emphasis of the group – often compared to Japanese keiretsu because of its specificity to gather unrelated businesses under the same CEO – was less on synergy and more on strictly financial performance (Ito & Rose, 2004, p. 67). But the willingness to achieve this financial goal lead to some problems. Because of its too diversified businesses, it became difficult for the group to identify and implement an overall strategic direction. This report will analyze the problem of the massive diversification of Virgin Group which can lead to a loss of value for the group's image. Firstly, it will describe the troubles that Virgin could face in the future. Then, some solutions will be discussed. Finally, recommendations will be advised to try to deal with these potential issues.

Virgin corporate strategy is to increasingly diversify itself in more industries and products. However, even if Virgin Group uses an unrelated diversification strategy, it has never diversified its brand name. All the services and products the company provides to customers have the name “Virgin” in common: Virgin Blue, Virgin Drinks, Virgin Music. This strategy can be a source of problem because the brand can lose its value.

Extraits

[...] After that the group will have to implement a restructuration plan to reorder its organization. In term of management strategy, it can just have a beneficial impact. First, Virgin will be able to focus its effort on a specific activity and consequently to increase the benefit of the group in this sector by innovating, improving the service Second, the risks for the company will decrease because a unique image of the brand will be communicated. References Castillo, A. (n.d.). Virgin Group vs. Benetton Group. [...]

[...] The effect of service brand extensions on corporate image: An empirical model. European Journal of Marketing Rompf, P. (1999). Consumer's evaluation of a new product bearing a familiar name: an exploratory study on brand equity extensions in the hospitality industry. Journal of Vacation Marketing, 253-262. Simerly, R. (1992). Corporate strategy: should US companies establish keiretsus? The Journal of Business Strategy, 13(6) Tennican, M. (1987). Reinvigorating corporate profitability. The Journal of Business Strategy, Boston, Virgin Group, retrieved September from www.virgin.com/company Virgin Group Resources: Exploring Corporate Strategy. (n.d.). ese courses online. [...]

[...] Martinez, E. & Pina, J. (2010). Consumer responses to brand extensions: a comprehensive model. European Journal of Marketing. 1182- 1205. Melicher, R. & RushSource, D. (1972). The Performance of Conglomerate Firms: Recent Risk and Return Experience. The Journal of Finance. 381-388. Newing, R. (February 2000), Global impetus for take-off to exciting new digital horizons CASE STUDY: VIRGIN. Financial Times Pina, J., Martinez, E., de Chernatony, L., & Drury, S. [...]

[...] Since its creation, Virgin Group's values are very broad. Virgin website (2010) declares that “Virgin stands for value for money, quality, innovation, fun and a sense of competitive challenge”. This blurred definition of the main objectives of the company has enabled Virgin to diversify its activities in a wide range of industries and to transfer its brand name to each of the new products or services. Actually, two factors can explain Richard Branson's willingness to keep the Virgin name for all of its new products. [...]

[...] That is why Virgin Group has to be very careful when it wants to extend its brand. Without doubt, the most important factor of success of an extension is the consistency with the image of the extended brand (Martinez & Pina p. 1199). Therefore to be successful, the new product has to match the essence of the brand on the new market (Kim p. 465). Even though it seems very interesting and profitable to extent the brand, Richard Branson should be very careful when he plans to conquer a new market. [...]