Johnson, Whittington and Scholes, Exploring Strategy, 9th Edition, Instructor's Manual

strategic reasons for this success. Theoretically, this success should lie in strategic relationships(synergies and similar), which the student should explain. Where bidders' share-prices fallparticularly far, they should look for reasons for scepticism about the strategic rationale;typically, the press coverage will provide ample guidance here.

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The Virgin Group

Students will probably have different views on the corporate rationale of the Virgin Group asthis is a private limited company and Branson uses the media very carefully to enhance hisbusiness. He appears to have two images: the carefree adventurer and the astute entrepreneur.

Students may form an opinion through the lens of either of these two images or a mixed viewbrought together with the views of some of Branson's critics. Provided the logic of argument issound, answers may display a range of opinion.

The Virgin brand has benefited from its image in constantly attracting people who have newbusiness ideas. The organisation has developed into a very effective parental developertogether with the ability to enhance business ideas or reject them quickly if they do not meetVirgin's criteria.

Virgin, probably because of its private limited status, may stick with a business far longer if itfeels it has a long-term strategic role such as the rail business in the United Kingdom. As acounter to this, Virgin will sell off businesses it no longer sees as part of its strategic aims orthere is something more advantageous to invest in. They will also admit defeat altogether:Virgin Cola and Virgin Computers are prime examples of this. Here we see elements of aportfolio manager.

All opinions about this group, because of its size and complexity, will have elements ofconjecture. How clear, for instance, was it when Branson bought the group back from publicownership that he wanted to be rid of simply earning profits for shareholders, the constraints ofthe City and the need for quick profits rather than the steady build up of businesses which heconsiders have long-term potential? The other side to this decision may have been that, fromthe entrepreneur mindset, he was able to buy the company back at a very competitive price andhe wanted to operate without the public eye minutely viewing how he ran his variouscompanies.

Question 1: Virgin's various diversification moves in terms of Ansoff's framework(Figure 7.2)

Virgin's moves exemplify a wide range of Ansoff strategies. The addition of Our Price to theexisting Virgin stores was a case of market penetration (in terms of Figure 7.2, box A). Most ofVirgin's moves have involved diversification, both related and unrelated. Virgin Cosmetics,VirginVodka and even Virgin Mobile could all be considered as launching new products andservices to existing markets that is predominantly the youth markets that Virgin had establishedwith its retail business. These fit into the related diversification strategy in terms of productdevelopment (Figure 7.2 box 8). The extension of the Virgin Mobile business into India could beconsidered a related diversification strategy in terms of market development (Figure 7.2 box C);existing service to a new market. The original move from Virgin Stores into the airline businesswas a Conglomerate Diversification strategy (Figure 7.2 box D). It would be worthwhilediscussing with students the extent to which the Ansoff strategies should be considered as

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Johnson, Whittington and Scholes, Exploring Strategy, 9th Edition, Instructor's Manual

distinct types, or more as different degrees of relatedness along continua. Similarly, thepotential relatedness in terms of 'dominant logic' (Section 7.3) could be raised.

question 2: How does Virgin add value as a corporate parent? Is there anything more itshould do to add value?

Virgin's parenting added-value activities include

• the possible provision of a ready-made brand

• the opening up of more channels to finance with better terms

• the use of experienced start-up mangers to increase the chance of success

• public relations and marketing skills

• the ability to take a longer term perspective than would be afforded by such a group were itoperating as a PLC .

Students might be asked what type of parenting role Virgin typically plays - mostly the parentaldeveloper (Section 7.6.1). Students should then look at different types of start-up (e.g. VirginIndia) and consider whether they would benefit from any of the above, and, at the same time,this may highlight other aspects that Virgin may be able to improve onto add value (evenelements of 're-structuring' at Virgin Rail).

Question 3: Assessment of whether moving further into the banking industry is the rightstrategic option for Virgin. Does the continued pursuit of this industry suggest a morecareful hidden strategic plan that is not revealed to outsiders?

Students should look through the case material and form an opinion whether there are distinctstrategic patterns as the organisation has grown. Some of the issues that might be raisedinclude

• the likelihood of an organisation of this size not having some formal strategic plan.

• whether Virgin has been gaining sufficient experience in financial offerings

• what condition an industry has to be in for the Group to venture into (use Porter's 5 forces).Does the banking sector meet this criterion?

• does a possibility exist to restructure this market and gain competitive advantage?

• does financial services constitute an 'institutionalised' industry that is ripe for 'shaking up'?

Question 4: What would be the challenges faced by a successor to Sir Richard Branson,and what might he or she do?

Some of the issues students might consider include

• all aspects of his ability and personality need to be evaluated and then the question is -which-of these -will need to. be replicated in a new-I~~der-2.-Sollle-m~y·no!-b~ fO_!.lnd·~asily;__:_--: ..::....:=-._ .::':'=.:..:~-="c.some may not be necessary!

• Some discussion of where the company is, in terms of growth and financial condition,necessary and this needs then to be integrated into the type of leader required, depending

97© Pearson Education Limited 2011

Johnson, Whittington and Scholes, Exploring Strategy, s" Edition, Instructor's Manual

on the opinion formed. This should lead the discussion into what the new leader may needto do.

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• Change of brand image?

• Less diversification in the future?

• Create additional brands to suit changing consumer preferences?

• Rationalisation of the existing business, including divestments?

• How will the Group maintain its unique 'fun but competent' image in the future?

This is a very large organisation which has been in the public arena for decades, so most of thestudents will have views on this organisation and its founder prior to considering the case. Theyshould be encouraged to try to find a reasoned view, based on the case material and any furtherresearch, rather than just sticking to some initial judgment or bias.

98© Pearson Education Limited 2011

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