Case Study
“Richard Branson
and the Virgin Group of Companies in 200
2
by
Robert M. Grant


An Assignment submitted in partial fulfillment of the requirements for degree of BSc (Hons) Logistics, School of Applied Sciences,


 


EXECUTIVE SUMMARY


The assignment reviews the given case “Richard Branson and the Virgin Group of Companies in 2004” and comments the comparison with other, the extent to be considered perspective, PEST analysis and key stakeholders.


Richard Branson, this person is the originator of the Virgin Group also.  All Virgin companies control an entrepreneurial culture and a strategy.
(Grant, 2003)


Firstly, to compare and contrast Virgin Atlantic Airway’s strategic development with Thai airways due to their similarities, from government to private owned.  VAA emphasizes on culture and command view because of the chairperson’s principle and controlled by the company; TH emphasizes on planning view and controlled by Government, almost strategies developments follow the planning procedure systematically.  Only focused one or two views that led limitations.  VAA is highly depends on the principles of Branson who becomes the only one and unique person that can decide the future of VAA, includes stay or shut down.  Another side, TA, involves more procedures for making decision that can be enhances and smoothen the running for a company.


Secondly, to stay what extent can the Virgin Group of Companies’ strategic development be considered prescriptive.  Analyzed the corporate, small business units and operational levels strategies of the company that proved Virgin Group cannot fully consider as undertaking the prescriptive approach.


Thirdly, apply Virgin Rail in the UK to analysis its issues in political, economic, society and technology as well as PEST analysis.  The successfulness of running a business depends on the policy, economy, society and technology of the place.  The result is the political factor leads Virgin Rail’s failure, relatively the social factor is very miner, and economic and technology are very positive.  So that the only way to survive Virgin Rail is to solve the political factor.


Fourthly, the main aspirations of key stakeholders has discussed and see their influences.  These key stakeholders are according to the Branson’s mind which includes owner and shareholders, investors, staff customers, government.


Try to think after Richard Branson’s leaving or his reputation be destroyed, how come!?  So, the finial word is Richard Branson have to establish a committee to share and continue his work.



 


CONTENTS


                                                                                                               Page


1          INTRODUCTION                                                                                1


2          COMPARE AND CONTRAST VIRGIN ATLANTIC AIRWAYS’ STRATEGIC DEVELOPMENT WITH THAI AIRWAYS INTERNATIONAL                                                                              2


2.1         Virgin Atlantic Airways’ (VAA) Strategic Development            2


2.2         Thai Airways International’s (TA) Strategic Development          5


3          WHETHER VIRGIN GROUP IS PRESCRIPTIVE                          8


3.1         About Strategy Development & Its Change                               8


3.2         The Current Strategies of Virgin Companies Group                    8


4          PEST ANALYSIS – VIRGIN RAIL IN UK                                      11


4.1         Political Factors                                                                           11


4.2         Economic Factors                                                                        11


4.3         Socio-cultural Factors                                                                 12


4.4         Technological Factors                                                                 12


5          MAIN ASPIRATIONS OF
KEY STAKEHOLDERS & THEIR INFLUENCES IN
VIRGIN GROUP OF COMPANIES’ STRATEGIES                        14


5.1         Key Stakeholders                                                                        14


5.2         The Influences from Key Stakeholders                                      14


6          CONCLUSION                                                                                   17


BIBLIOGRAPHY                                                                                     B1


 



 


Chapter 1
INTRODUCTION


This assignment based by the given case “Richard Branson and the Virgin Group of Companies in 2004” which is wrote by Robert M. Grant, in the content of the assignment it is derived into 4 parts, comparison with other, the extent to be considered perspective, PEST analysis and key stakeholders.


Firstly, to compare and contrast Virgin Atlantic Airway’s strategic development with any other (non-Virgin) airline, this assignment use the Thai airways as the compare party.  Because they have similar histories, from government owned to be privatized.


Secondly, to stay what extent can the Virgin Group of Companies’ strategic development be considered prescriptive.   To understand the prescriptive and emergent approaches and apply the current saturation of Virgin Group to identify whether it is prescriptive.


Thirdly, undertake a PEST analysis for EITHER Virgin Blue in Australia or Virgin Rail in the UK, this assignment is used Virgin Rail to analysis its issues in political, economic, society and technology.


Fourthly, to discuss the main aspirations of key stakeholders and how these have influenced the Virgin Group of Companies’ strategies, these key stakeholders are according to the Branson’s mind which includes owner and shareholders, staff and customers.


Further more, in the beginnings of each part of the content that define what strategic development, prescriptive, PEST analysis and key stakeholders are respectively.


Finally, there is only one conclusion to cover all my thinking of above-mentioned four parts in the last chapter.



 


Chapter 2
COMPARE AND CONTRAST VIRGIN ATLANTIC AIRWAYS’ STRATEGIC DEVELOPMENT WITH THAI AIRWAYS INTERNATIONAL


In the stage of setting up the strategies, managers definitely understand the strategies of which are the ways in which strategy develops in organisation.[1]  Different strategy developments have been defined by many different books, meanwhile, the following 4-views[2] is adopted when mentioning the strategy development process:


I.           Planning View;


II.        Command View;


III.     Logical Incremental View; &


IV.     Culture View


2.1.    Virgin Atlantic Airways’ (VAA) Strategic Development


Command View and Culture View are highlighted by Virgin Atlantic Airways (VAA)


The command view means that firm may have a very autocratic or charismatic leader, not necessarily through formal plans.
                                                                                 Jenkins, 2006


The culture view is that it occurs as the outcome of the taken-for-granted assumptions and behaviours in organizations.


                                                                        Johnson et al, 2005


Richard Branson founded VAA in 1984, in fact, VAA’s success highly depends on the founder’s principles – to provide the highest quality “innovative service” at excellent value for money for all classes of air travellers – this principle created and established the culture of VAA, because all Virgin companies also maintains an entrepreneurial culture based on Branson’s principle.  There are 4 strategic developments have been found out and will be further described in following:


l   Strategy One: The Underdog


Branson entered the markets or industries that have large, well established competitors, for instance, David is one of his favourite roles who against Goliaths, it is the example that the corporate against a big business.  Moreover, British Airways (BA) is the main competitor for VAA that leaded VAA always played the underdog role in competing with BA.  Though VAA and BA had been role as underdog and bully respectively, in 1992, VAA had been success to claim one and half million dollars from BA due to BA pursued a “dirty tricks” campaign against Branson’s company.[3]


l   Strategy Two: Differentiation


Branson also has another philosophy in his principle which is to be a pioneer rather then a follower of the leader.  In order to reach this point, VAA must offer highest quality innovative service for its air travellers.  Its innovative actions include:


n   1986, the 1st airline provided sleeper seats in upper class


n   1990, the 1st airline brought in the automatic defibrillators, & trained the staff to help in-flight cardiac arrest victims


n   The 1st airline installed individual TVs to all classes of passenger on the wide-bodied aircraft


n   2005, won the RFID Breakthrough ‘Integration’ Award since it is as a leader in RFID 2005 


VAA applied RFID tag on the important parts that used in aircraft maintenance and repairs at Heathrow Airport warehouse, UK.  The technological advancement is always the advantage taking for Virgin and the customers, said by Mark Butler, System Implementation Manager, Engineering Department, VAA.[4]


l   Strategy Three: Jointing Alliance


VAA has jointed an alliance with many airlines until 2006 that providing better choice on where and when for its customers’ flights, the member of that alliance includes Singapore Airline, Bmi British Midland, Continental Airline, South African Airways, US Airways, Virgin Blue and Air China.  All above airlines also signed Codeshare Agreement, so the connections between partners’ services become closer, customers could enjoy better service and value, such as checking customers and their luggage over to their final destination and synchronizing their schedules with VAA’s partners.  Turn out the customers of VAA could enjoy the shortest possible connections between their services.[5]


The crises of 11th September, 2001 that affected the worldwide economy, VAA also got heavy losses in financial aspect.  The alliance strategy was significantly assisted the recovery, because it reduced the investment and the accompanying inflexibility and risk during the uncertainties of operating in other countries.[6]


l   Strategy Four: Partnership


In 1999, Singapore Airline acquired 49% VAA stake that can reinforce to provide the highest quality innovative service at excellent value for money for all classes of air travellers.  Singapore Airline is a unique global partner, this is a perfect collaboration since both 2 airlines have an incomparable reputation for quality and innovation, and have own numerous awards from the travel industry.  According to the terms of the dealing, both 2 airlines’ routes will not overlap each other and are uniquely complementary, also they keep independent managements, and the rights to develop their own products.  This partnership action generated greater benefits to both companies’ passengers, such as fare, access to lounges world-wide and an increasingly seamless travel experience across their airlines network.[7] 


2.2.    Thai Airways International’s (TA) Strategic Development


In terms of strategic management, the major contrast between VAA and Thai Airways International (TA) is, TA is the one managed by traditional state-run or government hierarchy, so its companies strategy was established by country leader and the board, as same as or followed by the strategy of government, often the goal or the result is extremely unrealistic to the commercial.  The gap occurs in between the top management board and the tactical managers which more strengthen the difficulties in implementation and lessen the competitiveness in international airline market.  In last session of this chapter, that mentioned VAA emphasises on command view and culture view; in this session, TA emphasises on planning view to develop its strategies.


In the planning view, strategic planning is to use a formal planning system for the development and implementation of the strategies related to mission and objectives of the organization.      Lynch, 2000


l   TA’s Background


TA is a joint-venture company which was founded by two governmental companies and one private company – Thailand’s Domestic Carrier, Thai Airways Company and Scandinavian Airline System (SAS) – in 1960; 1977, Thailand Government bought the last 15% share from SAS that leaded to TA totally transfer to Thailand Government.[8]  Nowadays, all decisions are made by the Board of Directors and their strategic development is mainly focused on strategic planning.


l   TA’s Planning Procedure


One of the TA’s department – Corporate Planning & Information Technology Services” is established in TA for responsible to suggest strategies for TA.  After the seminar in 2001, this department suggested five corporate strategies for planning strategies and implementation, one of the strategies is about operational.


“The Board of Directors and the management group suggest that it (the operational strategy) is now a matter of urgency that TA must speed up the development of the airline’s state enterprise plan in compliance with the policy and guidelines.”, Minister Pracha, Bangkok Conference, 14 July 2001.   Then, Minister Pracha grouped TA’s problems for TA’s management group to take actions.[9]


Although this company is country-owned and running by Government, the country leaders provide comments and policies on commercial-based company, was it appropriate!?  This manner is intervened the flexibility of TA.


TA’s Chairperson – Mr. Chaianan Samudavanija – established 3 committees – Strategic Steering Committee; Project Management Committee and Task Force Committee – to increase competitiveness and the value of shareholder.  Today, TA could be effectively competing with other airlines because of such new strategies, but still time-consuming and not really flexible to implement in TA’s planning.



 


Chapter 3
Whether Virgin Group is Prescriptive


3.1.    About Strategy Development & Its Change


Strategy development includes two kinds of approaches mainly.  The first one is prescriptive approach which is the firm defined the objective and/or the main elements before brainstorm the strategy; vice versa, another one is have no clear objective and/or elements, all the strategy will be developing during the process, which call emergent approach.  Finally, what people and task performed base on above approaches that will generate the strategic change by formal or informal organizational structure from the managers, because of environment, business relationship, technology, people, life cycle, political power, etc (Tichy, 1983; & Kanter, Stein & Jick, 1992).  The importance of strategic change is that may occur considerable disruption, but this practice is also useful to analysis the specific causes for planning the best direction on management change.


3.2.    The Current Strategies of Virgin Companies Group


Virgin Group of companies could be analysis in three levels: corporate, small business unit and operation


Corporate Level Strategy


Diversification: The core business of Virgin Group is travel, but since early 1990, it has begun to involve in many other different businesses, such businesses are no directly or substantial relationships between each other.  Such businesses include mass media, entertainment, beverage, finance, weight industries and more, all these small business units (SBUs) enriched the Virgin’s portfolio.


Brand Extension: Virgin Group built its red brand to represent value for money, quality, fun, innovation, success and trust.  This idea is developed and applied on its whole range of businesses.


Joint-Venture: In the flight service, each airline have to get the permission for access paths by during with local governments, this process is very complicated and consume a lot of resources in terms of human, money and time.  Joint-venture is the method that can be easy to get this permission, also could be easy to meet the economic of scale to reduce cost, and share or lower the risk.


SBUs Level Strategy


Differentiation: Virgin Group provides the offer which other firms no.  The very common example is, Virgin Atlantic’s souvenirs are always different and united.  Another one example is Virgin Atlantic keeps its safety record is zero accident, to increase the confidence to its passengers (or customers) though its air ticket is expensive then others in generally.


Operational Level Strategy


Human Resources: Virgin Group considers peoples as the important assets, so it pays attention on peoples’ motivation, politics, culture and even the individual desires to manage and maintain peoples work well and comfortable.


Innovation: Virgin Group understands the new matters could attack the new customers and maintain the current customers, but its competitors also understand this simple theory.  Therefore Virgin Group based on the existed offers with new concepts or packages as a new products or services to get the competitive advantage in the industry.


The overall strategic development of Virgin Group is not fully undertake the prescriptive approach, due to this company has no specific element or way on developing its strategies.


 


Chapter 4
PEST ANALYSIS – VIRGIN RAIL IN UK


PEST stands for political factors, economic factors, socio-cultural factors and technological factors.  Lynch, 2000


4.1.    Political Factors


These factors are about the change in government or government policy.  The rail industry in UK has been privatised already, this action is initiated by UK Government.  Now, the rail industry is run by 2 parts, Railtrack and Franchise Co. provide railway track and railway services respectively.[10]   Virgin Rail got the opportunity to run the railway services from this political change to be a franchisee; however recently BBC reported Virgin Rail lost the franchise due to their service cannot reach the standard of the contract both in time and safety concerns.


The UK Government encourages the firm to consider the environmental effect, especially is the consumption products, like the powers and light tubes.


4.2.    Economic Factors


These factors are about the wider economy.  Through the UK citizens’ living standards have risen most families have car now, that lead to the railway service companies have to directly compete with road transport.  Passenger Travel in the UK Market Review 2007 stays household expenditure on travel and transport in the UK is estimated at £79.61bn in the year ending March 2006 — an increase of 5.2% compared with the previous year.  Most of this was accounted for by motoring expenditure.  The turnover of companies supplying public transport services by land, air and sea reached an estimated £14.38bn in the year ending March 2006 — a 7.1% increase on the previous year.  For this economic change, Virgin Rail has space to increase their profit if they still alive in this market afterward.  Though more families got the car that lead Virgin rail more directly to complete with road transport, not all families could driving cars that may be time or age.  Meanwhile, theses kinds of peoples may create the demand on travelling service, due to the inflation that leads peoples are more willing to pay on travelling fee.


4.3.    Social Factors


These factors are about the wider society.  In London, the demand of rail is decreasing, due to home office becomes normal and often, many people are working at home by using personal computers to communicate with office or their business partners, though many office peoples commute by rail on the days.  Virgin Rail and its competitors also face this same problem.


4.4.    Technological Factors


These factors are bout the application of new inventors or ideas.  The technology in rail applies to the development of high speed trains, or electronic singling system.  Virgin Rail is the pioneer in this area, it introduced the 125mph trains between London and Manchester has triggered a big switch from air to rail travel on the route, between these two destinations, the number of fight passenger and the number of rail passenger were recorded fell 12% and rose 37% respectively from March 2004 to March 2005.[11]  Virgin Rail reduces the time taken for long distance travel and efficiency in helping to win back customers to rail.


Except the improvement on speed, Virgin Rail also increased number of channels for passenger to buy tickets by web and machine (FastTicket).


Virgin Rail has got the opportunity to operate the UK railway service by the government policy, but the punctual problem and serials accidents lead the safety problem that make Virgin will not a part of franchise on railway service.  The inflection perhaps people will be willing to expand more on the travelling.  The change of working place also affects the demand on all the modes of transport.  The new channels have been developed through the web and new machine system.  The market still has space to operate obviously, but the most important consideration of a transport services provider is safety.  So the most weakness of Virgin Rail is to improve its reputation especially in safety and on-time to get back confidence of passengers.



 


Chapter 5
MAIN ASPIRATIONS OF KEY STAKEHOLDERS
& THEIR INFLUENCES
IN VIRGIN GROUP OF COMPANIES’ STRATEGIES


5.1.    Key Stakeholders


Stakeholders are individuals or groups that have some claim on the company.  They can be divided into internal claimants and external claimants. Hill & Jones, 1995


The founder and the chairperson of Virgin Group, Richard Branson thinks staff first, then customers and shareholders[12], therefore the chairperson, staff, customers and shareholders could be considered as the key stakeholders.


5.2.    The Influences from Key Stakeholders


l   Chairperson & Shareholders


Branson (the chairperson) is as a leader in Virgin which has used the corporate brand name across its entire product[13], the whole Virgin Group is influenced by him, and he is the greater single asset in the group.  Meanwhile, Branson is one of the shareholder of Virgin Group companies, so as same as other shareholder, his values will be added into the group and will be implemented in running the business.  Branson’s values are innocence, innovation, quality, fun and irreverence of authority, all of such values could be found in his choices of new ventures.  One of the good examples had mentioned in chapter two – The “Dirty Tricks” Campaign between VAA and BA.


l   Investor


The investors mainly focus on the profit and the return of investment (ROI).  This issue makes the conflict between investor and customers, because customers want to have better services that will increase the cost and decrease the maximization level of the profit


l   Staff


The skills, knowledge and suggestions of the staff are important to the company, Branson also understand this point so that he wants his best people will stay in his company for “venturing”[14].


Example:   Julie Bower, VAA Project Manager, response to source alternative customer relations management (CRM) software, then experienced partially customized system with VAA’s own data.  Finally, Saratoga System has been chosen as the provider of CRM system.


This example shows the valuable staff will affect the strategic development.


l   Customers


The best products or services are always seeking by customer, in order words, firms are required to provide best product or service for maintaining current customers and exploring new customers.  Companies that survive profitably in a competitive environment must be providing value for money.[15]  Therefore, customers also influence the strategies of the company.


Our first time with Virgin Atlantic, and out last! Chaotic queue at LHR took 3 hours to reach check in desk.  The cabin crews were arrogant and more interested in putting on more make up than serving passengers.  Virgin relies on their reputation from the eighties, but they have lost it big time.  Want to travel and enjoy the experience – avoid Virgin at all costs.            Skytrax, 2005


This example not only explains how customers influence the strategy development, also explains to provide the certain products to customer can reduce the probability of finical loss.


l   Government


The core business of Virgin Group is transport service, this business is highly regulated by the government.  So, government policy is very import to the company, like policy on safety, route, franchise etc.


 



 


Chapter 6
Conclusion


The most relevant contrasts between VAA and TA are: VAA emphasizes on culture and command view because of following the principle that provided by the chairperson – Branson – that it is controlled by the company; TH emphasizes on planning view which is controlled by Government so almost every strategies development is produced follow the planning procedure to lead the company more systematic.


In theory it should not only focus on single view, but these two companies are only focused one or two views, that led some limitations in VAA and TA.  For VAA, it is highly depends on the principles of Branson, he almost becomes the only one and unique person that can decide the future of VAA, includes stay in the market or shut down the business.  Another side, for TA, it involves more procedures for making decision that can be enhances and smoothen the running for a company.


As mentioned, there is only Branson is the key person for VAA or the whole Virgin Group, for the future, Virgin Group is suggested to established a number of rules or methods to maintain and investigate the current saturation of its businesses or the new ventures.


After that, this assignment defined Branson is the most key person that affects all the things in Virgin Group, then is the staff, last is the customers.


Last but not least, whether success to run a business depends on the policy, economy, society and technology in the place where located or plan to locate the business.  The result is the political factor leads Virgin Rail’s failure, relatively the social factor is very miner, and economic and technology are very positive.  So that the only way to survive Virgin Rail is to solve the political factor that one affected its franchise right.


Try to think after Richard Branson’s leaving or his reputation be destroyed, how come!?  So, the finial word is Richard Branson have to establish a committee to share and continue his work.



 


BIBLIOGRAPHY


1.          Aker A. D. (2005) Strategy Market Management, 7th edn, United States: John Wiley & Sons, Inc., p 217


2.          Bamford C. G. (2006) Transport Economic, 4th edn, UK: Heinemann


3.          Boles T. (2005) Virgin Trains, The Business, 19 January 2005


4.          Coyle J. J., Bardi E. J. & Novack R. A. (2000) Transport, 5th edn, United States of America: South Western College Publishing Thomson Learning


5.          Ensor J. & Drummond G. (2001) Strategic Marketing: Planning and Control, 2nd edn, Oxford: Butterworth-Heinemann, p.195


6.          Grant R. M. (2003) Contemporary Strategy Analysis, 4th edn, Great Britain: Blackwell


7.          Hill C. W. & Jones G. R. (1995) Strategic Management Theory: An Integrated Approach, 3rd edn, USA: Houghton Mifflin Company, p 45


8.          International Organizational for Standardization (2007), ISO – International Organizational for Standardization [online] Available at: <http://www.iso.org/iso/en/ISOOnline.frontpage> [Accessed 10 July 2007]


9.          Johnson G. & Scholes K. (1997) Exploring Corporate Strategy, 4th edn, Great Britain: Prentice Hall, Chapter 2


10.      Johnson G., Scholes K. & Whittington R. (2005) Exploring Corporate Strategy: Text and Cases, 7th edn, England: Pearson Education Limited, p. 9, 581


11.      Lynch R. (2000) Corporate Strategy, 2nd edn, England: Pearson Education Limited, p. 109-111


 

12.      Passenger Travel in the UK Market Review 2007, April 1, 2007, US:Key Note Publications Ltd, p. 242


13.      Robbins P. R. & Coulter M. (2005) Management, International 8th edn, United State of America: Pearson Prentice Hall


14.      Saratoga System, INC (2000), Virgin Atlantic- Saratoga Systems helps Virgin Atlantic improve its customer relations [online] Available at: <http://www.saratogasystems.com/downloads/Virgin_Atlantic-1205.pdf> [Accessed 11 July 2007]


15.      Skytrax (2005) Virgin Blue [online] Available at: <http://www.airlinequality.com/Forum/vir_blue.htm> [Accessed 11 July 2007]


16.      Tata Consultancy Services Ltd. (2007) Virgin Atlantic Airways RFID Pilot Receives Award for Leading Integration [online] Available at: <http://www.tcs.com/0_media_room/releases/200511Nov/Virgin_atlantic.htm> [Accessed 8 July 2007]


17.      Hong Kong Trade Development Council (2007) tdctrade.com [online] Available at: <http://www.tdctrade.com/> [Accessed 10 July 2007]


18.      Thai Airways International (2007) [online] Available at: <http://www.thaiairways.com> [Accessed 8 July 2007]


19.      The Times 100 (2007) PEST Analysis


20.      Virgin Atlantic Airways (2007) All About Us [online] Available at:  <http://www.virgin-atlantic.com/en/gb/allaboutus/index.jsp> [Accessed 8 July 2007]


21.      Wikipedia (2007) PEST analysis [online] Available at: <http://en.wikipedia.org/wiki/PEST> [Accessed 10 July 2007]


 


 


APPENDICES (IF ANY)



 


[1] Johnson & Scholes, 2005.


[2] Johnson & Scholes, 1997.


[3] Aker, 2005 & Grant, 2003.


[4] Tata Consultancy Services Limited, 2007.


[5] Virgin Atlantic Airways, 2007.


[6] Aaker, 2005.


[7] Virgin Atlantic Airways, 2007.


[8] Thai Airways International, 2007.


[9] Thai Airways International, 2007.


[10] Bamford, 2006


[11] Boles, 2005


[12] Grant, 2003.


[13] Ensor & Drummond, 2001.


[14] Grant, 2003.


[15] Johnsos et al, 2005.



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