The Virgin Group

The Virgin Group was an unusual organisation. It comprised a loose alliance of companies linked primarily by the Virgin Trade trademark which was run by self managed teams. The Virgin Group is of the United Kingdom’s largest private companies and in 2006 it estimated turnover at £10 billion. This is largely to the vast amount of diversification of setting up companies under the Virgin brand.  

The corporate rationale of the Virgin Group was to enter into new markets under a joint venture. The joint ventures are one way of using the theory of diversification, which can be defined as, ‘a strategy which takes the organisation into new markets and products or services and therefore increases the diversity that a corporate parent must oversee.’ The joint venture would consist of where Virgin will provide the brand. For example the AMP injected £450 million and Virgin only contributed £15 million thus resulting them forming a company called Virgin Direct. Since the Virgin brand was the group’s greatest single asset, they establish themselves as a major global name and hence resulting them to have a number of core businesses. For any other potential businesses looking to operate under the Virgin brand, this is a key asset for them as it will provide the recognition that they desire.    

The launch of so many new ventures provided the impetus for Branson to sell off his equity stakes in some of his more established ventures. In 2001 Branson quoted that ‘Every year I suspect we’ll sell five businesses in a given country, but we’ll replace them with 5 new businesses.’ Branson’s aims were to sell of the well established businesses, thus concentrating on joint ventures techniques which helped him to expand the Virgin brand at a low cost. For instead, the biggest deal that Branson completed was that he sold 49% of Virgin Atlantic to Singapore Airlines for £600 million.

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The theory of Boston matrix refers to what priorities should be given in the product portfolio of a business unit. To ensure long term value creation, a company should have a portfolio on all its products that contains high growth products in need of cash inputs and low- growth products that generates a lot of cash. Therefore, the basic idea of the Boston Matrix diagram is that the bigger the market share a product has, the more better it is for the company. From figure 1, we can see that Virgin is constantly joint venturing and therefore causing them ...

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