The Virgin group is among the largest privately owned company in the United Kingdom. In 2000, the company had an annual turnover in excess of £3 billion. Among the more than 200 businesses it operates, virgin Atlantic is the most successful and is a force to reckon within the airline industry. Other sectors the company operates
in include railways, financial services, entertainment, soft drinks, and cosmetics. Founded in 1970 as a mail-order recording business, the business reached a turnover of £250 million by 1986 and went public. Branson found the constant obligations to inform the shareholder and the constant conflict of interest too demanding and decided to take the company private. He bought back the shares from the public at the initial price, which valued the company at £240 million. Virgin group has grown fast to become a highly profitable business claiming a significant market share in new markets were it is involved. Although the financial operations of the company are managed in Geneva, the company has minimal corporate bureaucracy and its financial results are never consolidated.
The Virgin emergent approach to strategy development
The group comprises loosely linked autonomous units each self-managed by a team that shares a common brand name and values. Branson operates the business on the philosophy that whenever a business reaches a certain size, he spins off another business from it. The privately owned business enjoys the advantages of ignoring short-term goals, such as a high profit and healthy dividends for long-term objectives, such as reinvesting in viable markets to achieve higher profits in the end. The management approach is decentralized decision-making with emphases on autonomous business-level decision making. The management uses hands off approach except when finalizing major business deals and settling strategy. Branson involved is mostly in marketing and promotion of his businesses. Financing his business and deals is also a role the top management does not delegate (Haig 2011).
The emergent approach used by Virgin group is also the Incremental strategy. The emergent approach view strategy as evolving incrementally over time. The premises of this view are business operates in a social complex environment that is ever changing. These circumstances dictate business to evolve strategy through interaction between the stakeholders and the environment. The final objective is not clear and the business strategies are implemented on an incremental and continuous basis. The development and implementation of strategy is inseparable. The business; however, lacks long-term plan and the strategy is unstructured. Because no single strategy is chosen for implementation, this approach is a trail, and experimentation approach (Hämäläinen 2004).
The business strategy keeps on evolving in response to the changing business environment. The success of this strategy is not a guarantee; however, the strategy leaves room for change in response to the changing environmental conditions or the requirements of the stakeholders. Some of the businesses in the virgin group, such as Virgin Bride and Virgin Cola are not as successful; however, considering the number of businesses the groups owns, it is not a surprise that some of the businesses are not as successful. The emergent strategy is a success most of the time considering the meteoritic rise of the Virgin group (Haig 2011). The emergent approach is a way of formulating and implementing strategy, which just like any human endeavor when applied multiple times is bond to have a few failures.
A critically evaluation of Virgin Group’s strategies (1968-2003)
Sir Richard Branson founded the Virgin group in 1970. He is the most important component in the success story of his company. He applies his own personal philosophy in his corporate rational. His personal philosophy and personality is honored throughout the world. Anything associated with Sir Richard Branson and his brand name Virgin is given the benefit of double by the public. The trademark name is by far the most imperative asset in the company. He is known as the customers campaigner, which is a major milestone in public relations. Most of his reputation is from Bransons advertisement of the apple computers in Britain and his association with major names, such as Einstein and Gandhi. He is also attributed as a shaper of the 20th century. forfeiting short-term profit for long-term augmentation is an understanding that continues to shape the companys strategy and expansion policy (Haig 2011).
The Virgin group has no real sense of supervision hierarchy except in marketing and promotion issues. By adopting the hands off policy, Branson gives the managers autonomy encouraging them to runs the various companies under the Virgin Group on their own initiative. Managers feel a sense of responsibility for the companies they manage and try their best to make the business a success. The recruitment of managers considers the competitive steak in their personalities. The managers must also be novel people and forges in their fields. Ability to share values and work in a team is a prerequisite for employment as a manager in the company. Branson only employs managers made up of his own image in terms of personal characteristics and personality (Hämäläinen 2004).
The Virgin group conducts extensive research to determine if the specific market of interest has a niche that they can achieve and satisfy. The Virgin management team considers the ‘reward to risk’ ratio before setting up a business in any sector. The businesses in the Virgin group fall in five main categories. These are leisure, travel, personal finance, entertainment, and mobile phones. The Virgin group is a success; however, the business should become less diverse. The brand has become too diluted and is currently and endorsement brand only. The lessons learned by the business from the analysis of the environment must be applied. The business must invest and develop real expertise and try to limit risk. The business must be more responsive to the environment and change with the times (Haig 2011). Some businesses must rely on short-term profit to create a safety net for the major businesses in the group like the Virgin Atlantic when the market is down.
The benefit of parenting businesses
A corporate parent seeks to employ its own competences as a parent to append value to its businesses. The main asset of a parenting company is the brand. The role of the top management is to identify and exploit parenting opportunities. The main benefit of business parenting is the reputation the brand name evokes in the market. The reputation built by diversified business groups is easily leveraged by member businesses to gain and increase market share. Consumers are comfortable dealing with a business related to a large group that has built reputation over a long time (Anurag & Akbar 2007). The relationship with a parenting business gives the member firm an advantage, especially when the firm is entering a new market or venturing into a new market segment.
Parents in business groups pursue the important role of identifying lateral synergies across the various businesses. Membership with a parent allows for the access to products and services at a price below the market price and without the limitations associated with a resource-rationed environment. It also creates market for member firms in an otherwise underdeveloped and immature market. The cross buying therefore ensures the availability of raw materials and intermediate goods to the member firms. At the helm of the business group is the owner manager who is the principal coordinator of the roles the parent company plays. At the firm level, the firm managers handle the opportunities. The owner manager identifies and seizes opportunities to advance divisional performance. A Parents business create value only if it has the requisite skills and resources, understand the nature of business in the group, and always restrains from unproductive interventions (Anurag & Akbar 2007).
The parenting business coordinates resources in a group firms to tap new opportunities. To each independent firm in the group, the parenting business adds value by managing on its behalf a corporate strategy that is outward and opportunity seeking. Each individual firm within the group is free to pursue it own segment strategy without the interference of the parent company. The parenting business increases the socio-economic capacity of the individual firm. The parent firm is better equipment to deal with government clearance and compliance (Anurag & Akbar 2007). Because the parent business economic influence, complex relationships with retrograde bureaucracies are maintained at a low cost and with relative ease.
Levels of decision-making
Decision-making consist of four levels taking place at different times. First, the decision maker must perceive the problem. After perceiving the problem, he or she designs possible solutions to the problem. The decision maker must make a choice of what is the best solution to the problem the organization is facing. Finally, the decision must be relayed to the lower levels of the organizations for implementation with constant reporting on the progress of the implementation process (Hämäläinen 2004).
The different levels in the decision-making process are intelligence, design, choice, and implementation. Intelligence involves sorting out where the problem is occurring within an business. It answers the why, where, and with what effects a circumstance occurs. Possible solutions to counter the problematic circumstances are designed particular to the problem. By keeping track of consequences, opportunities, and cost, the managers of an organization make an informed choice (Anurag & Akbar 2007). Using reporting systems that report on the progress of a specific solution, the managers monitor the implementation phase. The levels are not linear to allow for adjustments when the solution under implementations does not produce the desired results.
The role of leadership in improving countrys national competitiveness
National competitiveness involves the identification of limitation and challenges posed by global completion on the local economy. Effective government action faces budget constraints and the private sector is increasingly facing stiffer competition from international organizations in both the local and international market. National leadership improves a countrys competitiveness through the setting up of institutions, the implementation of policies, and the identification of factors that determine a countrys level of productivity. To facilitate this, the national government forms advisory bodies or special government agencies to deal with the competitiveness matter (Anurag & Akbar 2007).
Leadership provides a clear diagnostics of the problem facing the economy. Leadership also develops persuasive vision that appeal to stakeholders will to seek change through the implementation of an outward-oriented strategy. Leadership fosters the networking of firms within the economy to increase synergy. Using a bottom-up approach, the leadership fosters the cooperation among the private sector, public institutions, civil society, political leadership. When the various components in the economy cooperate, the country is in a better position of identifying barriers, developing appropriate policies, and yield better results in the implementation of programs and policies (Hämäläinen 2004).
Conclusion
As technology and innovation enable new and better ways of doing business, it is increasingly necessary to reevaluate how managers view organization management and leadership. From the story of Virgin group, it is increasingly clear that leadership does not reside within a particular individual; rather it resides within the interaction between the leaders and his or her followers.
References
Anurag, M & Akbar M 2007, Parenting advantage in business groups of emerging markets, the Journal of Business Perspective, Vol. 11 l, No. 3 l, pp. 3-9.
Haig, M 2011, Brand success: how the world's top 100 brands thrive and survive, Kogan Page, London.
Hämäläinen, T J 2004, National competitiveness, and economic growth: the changing determinants of economic performance in the world economy, Cheltenham [u.a.], Elgar.
No comments:
Post a Comment