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The Virgin Group was founded in 1970 by Richard Branson and was incorporated in United Kingdom in 1989. It is one of the most recognizable brands in the world and the company is a conglomerate of consumer products and services. Today, it sells everything from air travel to soft drinks. Its biggest revenues are its travel operations led by Virgin Atlantic (Debra & James, 2007). With headquarters in London, the group employs 50,000 employees and its global brand revenues were USD21bn in 2011 (About Virgin, nd).
Virgin began as a mail-order record company named "Virgin" in 1970 as the then Richard Branson was considered himself as virgin and lack experience in business. Its business was selling cut price records by post. From 1970 to 1979, the business was primarily on music album. In 1979, the first Virgin Megastore opened in London.
From 1980 to 1989, Virgin had a major development as it ventured into video games, clubs and travels. This was the period when Virgin Atlantic Airways was born. Virgin also established The Virgin Airship and Balloon Company in 1987.
In 1990s, Virgin entered into radio broadcasting with its UK's first national music station. It also established into beverages industry by Virgin Cola and Virgin Vodka. In late 1990s, it launched its telecommunication venture by Virgin Mobile.
From 2000 until now, Virgin strengthens itself in various industries while maintains its strength in existing businesses. A lot of new Virgin brands were born during this period. Among them was Virgin Galactic, the first company providing space tourism to the world. Virgin now has numerous businesses and divisions operating in 34 countries around the world. The company had been controlled by Richard Branson himself.
Among key milestones include the born of Virgin Atlantic in 1984. In 1986, Virgin went public and listed in stock exchange. However the stock market crash in 1987 caused Virgin's share prices almost halved. Branson then decided to manage the business back into private ownership. In 2007, Virgin bought 20% stake in AirAsia X.
Overview of Industry, Market, Products and Services
Virgin Group is not a single entity but a conglomerate of over 200 operating institutions. Dirk, Hanna and Joachim, 2010 stated that the group is described as a group of separately run companies that are connected via financing and via the Virgin brand.
Virgin is split into several sectors in which each sector consists of several different companies. Table below shows the sectors and the companies in Virgin.
Virgin Atlantic Airways, Virgin Holidays, Virgin Trains, Virgin America, Virgin Galactic
Virgin Active, Virgin Balloon Flights, Virgin Racing, Virgin Experience Days, Virgin Spa
Virgin Media & Mobile
Virgin Media, Virgin Mobile, Virgin 1, Virgin Connect
Virgin Megastore, Virgin Festivals, Virgin Radio International
Virgin People & Planet
Virgin Unite, Virgin Earth Challenge, Virgin Green Fund
Source : Dirk, Hanna and Joachim, 2010
In 2011, Virgin Atlantic Airways reported revenue of £2.74bn, a 3% increase from 2010. The passenger numbers were also increased to 5.4million (Virgin Atlantic, 2012). Most of Virgin's profit came from Virgin Travel. The music industry for Virgin is declining and the partners had to close the Virgin Megastore in the States and Australia recently. While airline remains profitable for Virgin, the recession may pose a threat to Virgin. However, Virgin companies are managed independently and financed individually. So managing the companies' finances will be easier. In 2011, the revenue reported by the group was £13bn.
Major Issues that Impacted the Organization in Past 3 Years
In 2010, Virgin Atlantic and Cathay Pacific had infringed competition law in relation to passenger services on the London to Hong Kong route (Alistair Osborne, 2010). As a result, Virgin faces maximum fine of 10% of turnover which is £250million.
In 2011, Virgin Blue, V Australia, Pacific Blue and Polynesian Blue were rebranded to become Virgin Australia (Virgin History, 2011). The rebranding causes major upgrades to the airline's in-flight services to compete with Qantas (Routesonline, 2011).
In 2012, Virgin Trains lost a bid for West Coast rail contract to its rival FirstGroup for in which Branson bid £750million less than FirstGroup (Andrew & Nathalie, 2012). The contract is worth £5.5bn for 13 years. Branson slammed the government as Virgin Trains lost a rail tender for the fourth time and the previous winning rivals never deliver their promised plans and revenue. Branson urged government to review the decision.
How has the organization's culture, values, history and development influenced leadership, management and organizational behaviour
From 1980s, Branson perceived that the customers were underserved and he decided to enter one area of business after one another (Dirk, Hanna & Joachim, 2010). He emphasized on high standards on the products and services. This is the Virgin's culture which Branson brought since the inception.
Dirk, Hanna and Joachim, 2010 stated that Virgin also believe in growing through "organic growth" rather than acquisitions. Virgin will prefer reestablishment of the business rather than takeovers. This culture impacted both leadership and management. For instance, it causes Branson to have its own management style to manage these hundreds of different companies in different sectors. His idea is minimal management layers, no bureaucracy and tiny board (Dirk, Hanna & Joachim, 2010). Each company will run their own affairs. This type of leadership is called management through empowerment by giving company high flexibility.
Company Leadership, Management and Organizational Behaviour Analysis
Richard Branson is the Chairman of Virgin Group. He had spent his entire career with the company since 1970 with his audio-record mail-order business. He was born in 1950 in London. He is married and has two children. He has dyslexia and only attended school until the age of sixteen. Nevertheless he is the fourth richest citizen in United Kingdom in 2011 with net worth of USD4.2bn.
Branson had gone through difficult and successful time with Virgin Group. The recession from 1979 to 1982 caused several business ventures failed (Robert M.G, 2004). By 1983, Virgin was able to earn pre-tax profits of £2m. Then the Gulf War in 1991 caused a great lost to his airline. The group survived and by his leadership, the group enjoys much growth. Today, there are few hundred companies under the same umbrella internationally.
Branson's primary leadership type is both Charismatic and Transformational. He is charismatic because he impacts his followers to look beyond their self-interest for the benefit of the group. He always encourages his employees to be innovative and allows them to work independently. He is also a transformational leader because he pays attention to his employees' concerns and always expresses confidence to his employees' abilities to perform at a high level (Lexicon, nd).
b. Values and Attitudes
Although he has dyslexia and poor in academic, he has good connection with people. Debra and James, 2007 says he values his employees and treats them like a large extended family. He even shared with his employees the British Airways' winning lawsuit settlement of £610,000 and divided them equally to each employee (Debra & James, 2007).
He is a passionate leader who is passionate of his work. He is also a risk taker. The best example is the highly risky space tourism business with the Virgin Galactic in 2005. But he still continued with this venture believing it will be profitable.
People who know him describe him as fun, creative, risk taker, friendly, workaholic and great negotiator.
d. Style and Behavioural Characteristics
Michael W, 2011 stated there are three rules to Branson's leadership style and characteristics: friendly face, have fun at work and believe in your ideas and employees. Branson believes he developed his management skills through years of trial and error since his first business at 16 years old.
He also manages his time effectively. He knows when to take a step back from management and delegates the work after the initial planning so the business will still continue even without him.
e. Key Skills
His greatest skill is his ability to deliver himself effectively. He has a good public relation skill. He knows what the media wants and gives it to them (Paul B., nd). He also knows when to disappear either in meeting, organization or media so people will be more comfortable.
Branson usually work from home (Richard B, 2010). He always keeps a notebook in his pocket to record questions and suggestions. He travels most of the time and always meets people. When he travels in his Virgin Atlantic plane, he will meet his staff and passengers. His staff will always give suggestions while the passengers will also give some feedbacks. He will write them down and get their email address and make sure he responds to them next day (Richard B, 2010).
He knows that as a leader, he must be a good listener. He listens to people and learn from them. He is also good at praising people and never criticizes people openly.
g. Leadership Development
Branson's parents had been cultivating leadership qualities to him since he was young. Michale W, 2011 said his mother left him in a middle of nowhere and told him to find his way home when he was six years old. He was also put on bike to ride for 300 miles at ten years old. The experiences made him into what he is today by knowing endurance and leadership qualities. He also learns the leadership skills by trial and error. Not all of his new ventures were successful, there were quite a few which were total failures and were defunct. Branson never take these failures for granted. He took them as an experience and does even better in the future.
Organization and Management Analysis
a. Vision, Mission and Values
Virgin's vision is "to contribute to creating happy and fulfilling lives which are also sustainable - surely a vision worth aspiring to" (Virgin Group, nd).
Dirk, Hanna and Joachim, 2010 says that the Virgin's brand values are "Value for Money", "Good Quality", "Innovation", "Competitive Challenging" and "Fun". Virgin Group does not only value the customer, it also values the employees and make sure the employees are having fun at work.
b. Goals, Objectives and Overall Strategies
Virgin Group believes that business must also use its influence and resources to help find solutions to some of the world's major issues (About Virgin, nd). In 2006, Virgin pledged all profits from Virgin air and rail over the next ten years to combat rising global temperatures (Dan & David, 2006).
Virgin companies have been successful because Branson adopted the management through empowerment strategy. Although the companies fall under the same umbrella of Virgin Group, their managements are totally different and each is given flexibility to make own decision. The concept here is that, the business must go on even without the Chairman to lead.
Virgin also make good use of Information Technology and set up a portal www.virgin.com which consolidates all the services into a portal. The customers will be able to access multiple services through this channel. By doing this, Virgin will be able to market other services to the customer who originally intended to buy air ticket for example.
c. Competitive Strategy and Advantage
Branson always encourage his employees to spot new opportunities. Then the company will create an environment to leverage on the opportunity and make it happens. Branson is well-known for identifying new markets where he can add value even there are a lot of competitors in the market. His secret is he delivers product better than the rivals in terms of value and customer experience. This is what makes Virgin so successful and its brands are one of the most respected brands in the world.
The advantages of Virgin's brands towards its competitors are the products' qualities are better and better value for money. The prices are reasonable as well. Virgin's brands are already recognized by UK consumers and earned the trust of consumers.
The Virgin Group consists of 200 operating companies. The common trend of these companies is they all use the Virgin trademark and having Richard Branson as their shareholder or in management role. Virgin Group consists of few sectors with each sector consists of different companies.
Virgin was once a listed company but was delisted later as the stock market crashed which caused major share drop for Virgin. Now Virgin is a private managed company. All companies are empowered to run on their own. This allows higher flexibility for each entity to carry out plans on their own without the interference of chairman.
Succession planning has been identified as core of Virgin. In each company, the management must have a successful planning to make sure there is continuity in the business should the executive officers of the company not able to provide management lead.
Branson believes that fun must be integrated in the work so the employees will have balance in their life. That is why "Fun" has been one of the values of Virgin.
To manage the staff better, Virgin companies like Virgin Media uses performance management system for in-house learning and development (Anthony S, 2012). The system has been effectively cutting training time and increase productivity of the staff. Appraisal and review can be done via the system as well and was proven more efficient.
Branson is very particular in hiring the right people. He puts people to the correct ventures where he thinks the person is more likely to perform based on his skills. Virgin also provides staff training to train their skills.
Virgin is also a customer-oriented organization. Therefore the customer service skills and public relation skills are equally important to his staff. Branson himself is a genius in public relation. This might also encourage his staff to look more like him.
For Virgin, staff comes first and then customer. Branson believes that if the staff is happy, the customer satisfaction will also increase. Therefore, Branson values his staff so much that he encourages his staff to have a balance family-work life.
Virgin also seldom lay-off staff even the time is tough. During the Gulf war, the airline was so depressed but Virgin did not lay-off any staff. Virgin wants the staff to have faith in their company and work with full commitment. That is why Virgin's staff are so efficient and faithful even to this day.
a. Organization's International Strategy and Cross Cultural Issues
Richard M, 2008 says that Virgin entered into global markets through joint ventures. For example, Virgin Megastore formed alliance with partners in Japan, the USA and Australia. Some ventures like space flight and biofuels were funded by divestment. Virgin also bought a stake at AirAsia X of Malaysia. Virgin also setup new airline in Australia by forming Virgin Australia which is the main competitor of Qantas.
Most of Virgin's businesses have base in UK but Virgin have also a number of holding companies outside UK. This helps in saving lots of taxes from UK government.
Branson has always finds the opportunities to expand Virgin's brands to the rest of the world. He hired top executives like Ian Rowden to be Virgin's Chief Marketing Officer in 2011. Rowden will be driving full force to expand internationally and also expand the global team.
Virgin Group brought the company's culture in its global companies. They believe the culture starts from the top management. If there is an acquisition of foreign company, Virgin does not try to restructure culture as this will kill off enthusiasm of the existing employees (HCA, 2003). Virgin sees recruitment as equally important. Only right person with culture and personalities aligned with the Virgin's personality template will be shortlisted.
b. Power used in organization and how it is shared; internal politics and how conflicts are resolved
Each company under the same umbrella of Virgin Group is given flexibility to make their own decision although Branson remains the Chairman of those companies. However, the influence of Branson to the brands is still great.
It seems that there is a clash of responsibilities with the Virgin companies itself. Although each company has their own management, a key person of a Virgin's companies can be drafting strategies for the whole group. For example, Rowan Gormley who was with Virgin Direct actually acted as strategy expertise for the whole group (Robert M.G, 2004). Anyway this is the Virgin's culture. The internal politics will be handled by Branson himself as he wishes the employees to have fun at work, he would not allow the politics to affect the employees.
c. Main Communication Processes Description
Virgin Group has a central office, Virgin Management Limited (VML). VML provides advisory and management support to all its companies. Any big issues will be referred to VML and subsequent advices will be provided.
As Branson spends very little time in the office, main communication between office and Branson will be via email or phone. Branson even integrated his own blog into Virgin's website to communicate his thoughts and adventures to the employees.
There is also an internal magazine in Virgin called Rogers. The magazine is available online and used to communicate to employees about current affairs of Virgin.
d. Importance of being a Learning Organization and how this is demonstrated
Virgin knows that being a learning organization is important to the growth of the company. Virgin companies even have their own in-house training system to groom their staff. The training enforces empowerment and promotes team spirit. It also teaches them to be innovative and brings new business ideas to the group.
Virgin also trains the staff a lot of handling customers as their second priority is customers after employees. Customers are the pillars of the growth and the staff must handle the customers in professional ways. Satisfied customers will strengthen the values of Virgin's brands.
e. Handling Ethical Issues Policy and An Example of Resolving Ethical Issue
The scandal of price-fixing between Virgin Atlantic and British Airway in 2007 causes major effect to the Virgin's airline. Employees of the two airlines were alleged to exchange sensitive information which allows coordination of fuel surcharge. Virgin Atlantic, being the whistleblower was not liable to any fine. The scandal resulted in a fine of £270m to British Airways.
Branson admitted his involvement in the scandal. Steve Ridgway, CEO of Virgin Atlantic announced departure from the company in September 2012. He expressed regret over his failure to stop price fixing conspiracy between British Airways and Virgin Atlantic.
After the scandal, Ridgway ensured a thorough competition law training programme to be conducted so everyone understands the severity of the laws and make sure this will not happen again in the future (Julia K, 2009).
Major Strengths and Weaknesses of Company's Leadership, Management and Organization Behaviour
Virgin always tries to keep faith in their employees. Debra and James, 2007 says that by keeping faith in employees, a trusting relationship is built between employees and company and reduces the risk of having negative attitude employees.
Virgin has a culture that encourages risk taking and rewarding innovation among employees. This allows more business ideas and creative thinking from the employees and thus introduces new ventures for Virgin Group.
Virgin Group has so many companies with different business focuses. This causes some problem in managing the risks, controls and strategies of the group as a whole.
Virgin Group has too many companies suffering from lost. The companies which are making money are Virgin Travel and Virgin Records. In order to safeguard some money-losing ventures, Virgin sold profitable business to fund the failed businesses. For example in 1992, Virgin Records was sold to finance Virgin Atlantic and then sold 49% stake in Virgin Atlantic to Singapore Airlines to safeguard its music business (Richard M, 2008).
Branson has been the driving force of the success of Virgin's brands. Virgin brands are popular because of the Richard Branson as celebrity. This is a risk as there should be a succession plan so the successor would be able to carry on the Virgin's image upon the departure or retirement of Branson. If not Virgin brands may die off when that day arrives.
Branson is well-respected by his employees. Some take him as the role model in their life. This is a potential problem to the company as they might believe that without Branson, the company would break down. They will think it is no longer justifiable to stay in the company without Branson leading them.
Significant Recommendations for Improvements
Virgin should be less dependent on Branson. Although the companies are given flexibility to manage on its own, Branson still influences the companies' decisions. There should be a centralized way to manage this group of Virgin's companies. Perhaps the best way is to consolidate all the companies as Virgin Group and float them on the share market. This allows Virgin to have a better cash flow and better control of the company.
In order not to hurt the reputation of Virgin's brands, Branson chose to fund the unprofitable ventures by selling other profitable businesses. This should be put on stop. Money losing businesses should be sold or closed down. This allows more cash flow for the company. Virgin should have concentrate on the profitable business and build stronger financial position rather than selling them.
When entering a new venture, Virgin should not only think about innovation and fund. Survival is the key word for any business. Risk high and low return industries should be carefully planned and justified before investing in the business. Any mistake to those industries would tarnish the brands as customers would start to lose confidence on the brand.