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Virgin Group Ltd.: Branson and the emergence of an exception.
The economic theory underlying the principle of diversification is challenged by the presence of the Virgin Group in the markets. Virgin has established itself as a pioneer in product differentiation as a sole company. Without the need of mergers or acquisitions, Virgin carries a wide variety of products in a large number of markets. The answer behind Virgin’s success lies in its eccentric CEO, Richard Branson. Without him, product diversification would continue being thought of only as the outcome of horizontal integration, and not a plain emergence of a conglomerate founded from its very roots. ... Virgin, apart from the fact that it has not undergone any acquisitions, is comprised of a mind-blowing variety of products and services. ... This is where the Virgin Empire confuses many specialists. Alan Brew, from Addison Branding & Communications in New York, states the following: “Virgin makes no sense; it’s completely unfocused.”
The Virgin Group encloses about a hundred-and-seventy companies ranging from a healthcare program to travel agencies, limousine services, trains, sodas, bridal shops, investment services, wine specialty stores, record companies, mobile systems, successful airline companies and the well-established Megastore. However, for most companies Virgin does not represent a big competition problem. The parent company, Virgin has been obtaining an approximated 4 billion US dollars yearly since 1998. ... Virgin is a monstrously big company, however, in each independent division Virgin opts for a better-rather-than-bigger philosophy. Sir Richard Branson, chairman and owner of this group states that his successful key to the expansion of Virgin in diverse markets is that: “I always try to ensure that no Virgin product markets itself in a way that may conflict with the image of another Virgin product. ... ” Every one of Virgin’s products and services, can be differentiated from existing products by either the ‘cool’ image and design, or a distinguished and enhanced presentation. ... Behind this hectic organization lies Sir Richard Branson, who organized the conglomerate with the psychological economics he learned in his daily life. Branson started the empire when he was a teenager, after dropping his high school studies because of his dyslexia, by putting together a magazine called Student. As this magazine became more recognized, Branson started a recording business through the magazine. ... Branson got involved in the creation of the Virgin Megastore, and this lead him one step closer to the creation of his Empire.
One of the most competent businesses he has created is Virgin Atlantic, an airline that competes directly with British Airways in the United Kingdom. It provides him with a 51% of its total revenues (Virgin Atlantic, Virgin Express and Virgin Blue are his three passenger carriers). ... We could create an airline which would be fun to fly, which I’ll enjoy flying, and all those silly little things wrong on other airplanes, we could get right on our airline…” Virgin, after Branson’s intuition about the airplane market, cashed in 1. ...
This is why in the development of Virgin Atlantic, Virgin Express and Virgin Blue he considered necessary the exploitation of differentiation advantages. ... The success of Virgin Atlantic became so apparent that British Airways had to undergo into illicit competition in order to capture back its share of the market. By hacking into Virgin’s computers, they obtained a list of the VIP clients that had decided to switch to Virgin and offered them promotions. Virgin, instead of getting involved into a predatory competition, opted to press charges against British Airways, and even though, they never received an official apology, they pocketed approximately a million dollars, in what became the highest libel in British history . ... Now Virgin, for its own interest and the public’s has been struggling to stop a merger between two of the biggest companies in the air business. “We are fighting a British Airways-American Airlines merger because it is obviously not in the interest of the consumer…” Virgin is trying to avoid what could be the end of a competitive market, that would not only place Virgin Atlantic out of the game, but directly affect the public who will suffer the consequences in ultimately in the form of higher prices.
Virgin Express, which is Virgin’s European carrier, has never been able to become profitable given the amount of price competition arising from the direct competition with Sabena Airlines.
Approximate Word count = 3549
Approximate Pages = 14.2
(250 words per page double spaced)
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