Richard Branson : Virgin Group of Companies Case Study
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Rationale of the Paper
The contents of this paper include the business case study of the Virgin Group of Companies, which are being managed and owned by Richard Branson. Richard Branson is one of the most famous international entrepreneurs who have established an effective and prestigious company.
This paper discusses the opportunities and threats to the Virgin Group of Companies. Due to the success of the entrepreneurship and skills of Richard Branson, this paper will assess and evaluate his personal and business characteristics and approaches that determine the success of his company. These were chosen as the contents of the paper because it is relevant to assess and learn the techniques of Richard Branson in relation to business and marketing strategies and employee management. This information can be applied in future endeavors and business ventures.
Moreover, because there is a wide variety of concepts and theories in entrepreneurship, it is essential to know if these can be applied in real life situations. Due to this, the strategies of Richard Branson and the Virgin Group of Companies will be assessed based on the theories of entrepreneurship.
Opening Summary
Richard Branson is considered one of the most successful entrepreneurs in the United Kingdom, and one of the most successful businessman around the world. Because the concepts of entrepreneurship are essential in starting a business, it would be best if we will be able to assess the skills and the strategies being used by Richard Branson in his popular and prestigious company, the Virgin Group of Companies. Richard Branson made a difference in the entrepreneurial industry for he was able to establish and was successful in establishing the brand image and identity of Virgin Company to the various segments in the market. He was successful in making his consumers and target market realize that a variety of products and services are associated with the brand "Virgin", which makes the company triumphant in building its brand loyalty among its consumers. Moreover, he was able to manage the whole company, including international offices and a wide variety of products and services, with the dedication and alongside his successful and dedicated employees and partners. Several opportunities can be recognized, for the company was able to effectively and efficiently recognize the need of consumers, were able to fill this gap, and was amazingly victorious over it. Branson and his employees took advantage of their business strategies and skills, and were able to provide innovative services and products to the different market segments in the industry.
Opportunities and Threats
Opportunities
The utilization and maximization of the
Internet
Mergers, strategic alliances and joint
ventures with other companies
New international markets
Implementation of new information systems
New market segments, which offers better
profits
Establishment of brand image and identity
Brand loyalty of consumers
Success in use of advertisements and other
forms of media
Threats
Changing tastes and preferences of customers
Competitors have new, innovative product or
service
Increase in taxation
Access of competitors to channels of
distribution
Terrorism, outbreaks, biological warfare, and
hijacks (airline threats)
Failure of one group due to inadequacy of
quality materials in construction (Virgin Trains)
Business Model
The business model used by Richard Branson is the Focus Strategy or Model, which is designed to address a "focused" segment of the marketplace, product form or cost management process and is usually employed when it is not appropriate to attempt an 'across the board' application of cost leadership or differentiation ('Marketing Plan' 2006). Moreover, this model or strategy is based on the concept of serving a particular target in such an exceptional manner, that others cannot compete, and this usually means addressing a substantially smaller market segment than others in the industry, but because of minimal competition, profit margins can be very high ('Marketing Plan' 2006).
The success of the Virgin Group Company involves the application of this model or strategy because the company was able to establish a variety of subgroups that cater to a variety of needs of every consumer. The Virgin Group was able to establish Virgin Atlantic Airways, Virgin Records, Virgin Express, Virgin Cola, Virgin Vodka, and many others, and all of these subgroups are in response to the aim of the company for addressing and targeting specific groups in the market. Branson was just clever, responsible, brave enough to risk, and venture into these different kinds of businesses, which were accompanied by the excellent service and brand quality being offered by the Virgin Group. The application of this model is part of the company's success, wherein the company was able to target specific subgroups in the market.
Business History
Personal and Business Characteristics
Richard Branson was never interested in becoming a businessman or an entrepreneur, but despite his intentions, at 56, he has become one of the most successful and eccentric billionaires of the 20th century, being behind one of the most recognizable brands in history and sitting on an estimated fortune of $3.2 billion (Carmichael 2006). Sir Richard Branson was born in July 18, 1950 in Shamley Green, Surrey, an English entrepreneur, best known for his Virgin brand, which encompasses a variety of business organizations ('Richard Branson & Virgin' 2006). He was educated at Stowe School, he went to business at 16, published 'Student' magazine, and at the age of 20, he was the subject of a television documentary. Having founded Virgin as a mail order record company, he later opened his first store in London's Oxford Street, and in 1972, the Virgin Records music label was formed ('Profile: Richard Branson' 2004).
The parents of Richard were Ted and Eve, who showered his childhood with love and encouragement. His father was a lawyer who had to set aside his passion for archeology at the request of Richard's grandfather to follow in the family footsteps, while his mother was an stewardess who originally pretended to be a man in order to become a pilot instructor, and together, his parents were able to impart in him a sense of hard work and the need to be financially successful (Carmichael 2006). At the age of 15, he was sent to a boarding school and found success on the field rather than in the classroom, as he did extremely well in a wide range of athletics, which made him famous in school. However, he had a hard time struggling with his academics because he suffered from dyslexia, which was considered a relatively undiagnosed problem during his time. Because of this, he was unable to read, write or spell, and be beaten for it. Moreover, Richard was sent to a different school, but was initially expelled for his nocturnal visits with the daughter of the headmaster. Nevertheless, because of the fake suicide note of the headmaster's daughter, Richard got the expulsion overturned, and from this, he was able to set up Student Magazine at the age of 16. He opened the Student Advisory Center a year later, a charity to help young people, and at the first issue of his magazine, the headmaster of his school wrote to him saying, "Congratulations, Branson. I predict you will either go to prison or become a millionaire" (Carmichael 2006).
After his successful launch of his Student Magazine, he turned his attention to music, and the name "Virgin" was chosen because a female friend involved in setting down the initial record shop commented that there were no virgins left amongst them, and so the Virgin Airlines was born. Virgin Airlines was very much a Richard Branson style company offering reasonable prices on transatlantic flights, and once again, he spotted a gap in the market and filled it impressively. Sir Richard Branson was the reserve pilot for the Virgin Atlantic Global Flyer, and is considered to be one of Britain's best know entrepreneurs who combines his enthusiasm for running the Virgin group of companies with his love for high-risk, high-adventure world record-breaking attempts ('Richard Branson & Virgin' 2006). In the year 1972, Virgin had signed Mike Oldfield as their first artist, who sold 5 million copies, and because of this, Virgin Music had made a name for itself, later signing household names such as the Sex Pistols, Culture Club, The Rolling Stones, Phil Collins, Genesis, and Janet Jackson (Allen 2006).
Aside from the success of Virgin Music, in 1984, Richard Branson formed Virgin Atlantic Airways, and in the last two decades has grown into Britain's second largest carrier. In his aim to promote the Virgin Atlantic, Richard Branson became involved in a number of high-publicity record-breaking attempts throughout the 1980s and 1990s, such as crossing the Atlantic Ocean on a boat - Virgin Atlantic Challenger II, and crossing the Pacific from Japan to Canada on a balloon, breaking all existing records, as he was able to circumnavigate the entire world. The Virgin Atlantic was said to be profitable even in its first year, as it has featured its three classes of service, namely, Economy, Premium Economy, and Upper Class, which include free in-flight drinks and meals, often including ice cream, and seat back personal TVs, which was pioneered by Virgin (Allen 2006). Passengers of the Upper Class can request complimentary limousine service to and from the airport and have access to the airline's Clubhouse Lounge at London's Heathrow Airport, where massage and grooming services can be availed (Allen 2006). However, to keep his airline company running, Branson sold the Virgin Music label to EMI in 1992, which is a more conservatively minded company, and previously cancelled the contract of the Pistols ('Richard Branson & Virgin' 2006).
Moreover, Richard Branson has successfully launched more businesses, including the launch of Virgin Mobile in 1999, the Virgin Blue in Australia in 2000, and later failed in a 2000 bid to handle the National Lottery. In 1997, he took risks in entering a railway business, with promises of new high-tech tilting trains and enhanced levels of services. However, Virgin Trains soon ran into problems with the aging rolling stock and crumbling infrastructure it had inherited. In addition, Branson has also developed a Virgin Cola brand and a Virgin Vodka brand. Recently, on September 25, 2004, he announced the signing of a deal under which a new space tourism company, the Virgin Galactic, will license the technology behind SpaceShipOne to take paying passengers into suborbital space, and this will be made available to public by late 2007 with tickets priced at $200,000 ('Richard Branson & Virgin' 2006).
Entrepreneurial Characteristics and Approach
It has been reported that Richard Branson has been tagged as a 'transformational leader' by management lexicon, with his maverick strategies and his stress on the Virgin Group as an organization driven on informality and information, one that is bottom heavy rather than strangled by top-level management ('Richard Branson & Virgin' 2006).
According to Richard Branson, his success was not planned, for it just happened, though he has his ten secrets to his success:
You have to challenge the big ones.
Keep it casual.
Haggle: everything is negotiable.
Have fun working.
Do the right things for the brand.
Smile for the cameras!
Do not lead "sheep", herd "cats".
Move like a bullet.
Size does matter.
Be a common, regular person
('Richard Branson & Virgin' 2006)
Moreover, his entrepreneurial success and approach is related to his style of leadership. Branson believes that his leadership style has its origins in his upbringing, where his parents taught him to stand on his own two feet, including learning valuable lessons, which helped built his character, endurance and leadership qualities. He also believes that he learned his leadership style through trial and error, since founding his first company when he was still 16 years old. His leadership approach includes skills and personality of caring about people, liking people, and bringing about the best in them, which he reinforces with all his CEOs and top managers. Moreover, he places particular attention on time management skills, and making quality time with his family and vacation. He also influences this philosophy even further by using his business skills and those of his employees and managers to discuss social issues around the world. He also emphasized the development of delegation skills, where strong personality is needed to build a business from scratch. Skills in delegation means that being a leader, one has to be good at helping people run individual businesses, and willing to step back ('The Importance of Being Richard Branson' 2005).
Furthermore, Branson believes that employee motivation and recognition is also important, and this was explained by stating that, "If a flower is watered, it flourishes. If not, it shrivels up and dies" ('The Importance of Being Richard Branson' 2005). From this, it can be seen that Branson gives due importance to his employees and treats them fairly. He even strongly believes that if an employee is not excelling in one area of the company, he or she should be given the opportunity to do well in a different Virgin Group job, and firing them is seldom an option ('The Importance of Being Richard Branson' 2005). In addition, he also emphasized that interaction between employees and managers is fundamental, and that motivational strategies extend to innovative ideas, for the key to encouraging innovation within the Virgin ranks is to listen to any ideas and to offer feedback ('The Importance of Being Richard Branson' 2005). This also involves the rendering respect and building trust with one another, which will be helpful in maintaining effective and efficient communication and interaction among the employees of the Virgin Company. Branson believes that to develop a level of trust with his top managers, he must set the direction and then step back to let them navigate ('The Importance of Being Richard Branson' 2005). This shows that Branson is giving his employees the freedom to do what they want, but under his supervision and guidance. This freedom builds trust among his top managers and employees, and motivates them to perform better in terms of their work performance.
With the success of Richard Branson's philosophy and approach in his company, using effective leadership, giving motivation, employing effective communication, interaction, job redesign, building trust and respect, it is very evident that the company has been performing well in the various industries that it manages. Based on the performance of Branson's Virgin Atlantic Airways, it has added new destinations on its flights, having original flights from London Heathrow and London Gatwick, to the United States, the Caribbean, Africa, the Middle East, Asia and Australia. This year Virgin Atlantic Airways added new destinations and services, which includes:
London Heathrow to Dubai
London Gatwick to Montego Bay
Manchester to St. Lucia
By 2007, Virgin Atlantic Airways will be adding new destinations and services to the following areas:
London Heathrow to Chicago (Beginning April
23, 2007)
London Heathrow to Nairobi (Beginning June 1,
2007)
Glasgow to Orlando (Beginning June 23,
2007/Seasonal)
London Gatwick to Mauritius (Beginning
November 2007)
('Virgin Atlantic Airways' 2006)
In relation to the values and philosophy of Richard Branson, such as his desire for innovation and motivation of his employees, he was able to conceptualize and introduce a new product, which is the Virgin Mobile. Virgin Mobile Ltd is a mobile phone service provider operating in the United Kingdom, Australia, Canada, South Africa, the United States, and France, which offers prepaid pay as you go service ('Virgin Mobile' 2006). The introduction of this new product and service just goes to show that the leadership, motivation, and ideas of Richard Branson are essential in his management of the Virgin Group of Companies.
It can be seen that with the leadership style and approach of Richard Branson that he employs the combination of a variety of leadership styles. Some of the styles he may apply are the Authoritative or Charismatic Leadership Style, the Affiliative Leadership Style, and the Democratic Leadership Style. The Authoritative style is the most effective in driving up every aspect of climate; for the leader is a visionary that motivates people by making clear to them how their work fits into a larger vision; the Affiliative style involves building team harmony, increasing morale, improving communication, or repairing broken trust, where praise is used freely; and the Democratic style is the ideal leadership style, where the leader spends time getting his employees ideas and builds trust, respect and commitment (Goleman 2000). The combination of these leadership styles is important for these styles enable Richard Branson to motivate his employees and provide them the driving force in working in his company. Moreover, his leadership style influences his decisions in building trust and respect within the company, and facilitates effective and efficient communication and interaction with one another.
Justification of the Entrepreneurship Theories
Theories of entrepreneurship includes the theories of Knight, Hayek, Schumpeter, Mises, Kirzner, Shackle, and Lachmann, and these theories become the basis for the justification of the actions and strategies of Richard Branson and his Virgin Company. The Knightian entrepreneurship involves the rash of self-confidence in one's abilities to forecast the future. The Hayekian entrepreneurship involves the coordination and dissemination by entrepreneurs of the knowledge held by different market participants of new factual events, which have occurred and which are not yet fully appreciated by all market participants in the flow market for goods. The Schumpeterian entrepreneurship suggests the innovation of new products, new techniques of production, opening of new markets, opening of new sources of supply, improvement of management techniques, and the improvement of distribution methods. The Misesian entrepreneurship states that since all market participants face uncertainty, all action involves entrepreneurship, and all market participants are to some extent entrepreneurs. The Kirznerian entrepreneurship is the theory wherein the entrepreneur buys factors in the present at a relatively low price, and turns them into finished goods, which he sells later at a relatively high price, thereby creating entrepreneurial profits. The Shacklian entrepreneurship is the theory wherein the entrepreneur creates in his mind inspired multiple visions of alternative futures, from which he chooses the best and most likely to be achieved, and then acts to implement that chosen direction, and the Lachmannian entrepreneurship, brings the capital markets closer toward equilibrium, and this assists the general economy including the flow market for goods to move toward equilibrium (Wood 2005).
I believe that Richard Branson was able to apply the different theories of entrepreneurship, for it is evident from his personal and business characteristics that he is able to apply and implement an effective leadership style, to organize his company, and to perceive risks as an opportunity for him and for his company to continually grow and profit. In accordance to the different theories of entrepreneurship, Richard Branson was able to adapt everything, and used them in his advantage in addressing his target market. Most importantly, he used the theories as a guide in his decision-making and in conceptualizing, producing, innovating, and introducing new products and services to his target market. However, problems can also be encountered due to the size and the variety of cultures, and corporate diversification present in the company. With this, Richard Branson is considered to be a 'habitual entrepreneur' for the Virgin Company is a single company with subsidiaries as divisions, which are controlled by the center or the holding company, and each subsidiary is often a venture created or acquired by an entrepreneur or entrepreneurial team (Rosa 1998). In addition, each subsidiary or subgroup may have been created for different motives, and have no pre-planned connection with other companies or venture within the larger group, and this is being exhibited by the Virgin Group of Companies, for the common factor of the whole company is Richard Branson himself, the driving entrepreneur (Rosa 1998). From this, it can be deduced that the theory being employed and applied by Richard Branson in the Virgin Group of Companies is the Schumpeterian theory of entrepreneurship, which suggests the innovation of new products, new techniques of production, opening of new markets, opening of new sources of supply, improvement of management techniques, and the improvement of distribution methods (Wood 2005). This can be seen in the approach of Richard Branson of venturing into a variety of businesses, including music, airlines, trains, beverages, and cellular phones. This shows that Richard Branson aims at targeting different market segments and consumers, and with this, profit will surely be gained. From the previous discussion, it has been mentioned that Richard Branson exhibits good leadership skills and employee management in his company, as he is able to provide and implement freedom and efficiency of his employees at the same time. With this, it can be deduced that Richard Branson is able to incorporate the theories of entrepreneurship and combine it with effective and efficient leadership strategies. In line with this, the effectiveness of his approach motivates his employees and allows them to foster a pleasant working atmosphere through effective and efficient communication and interaction with one another.
