Case study of week 16

1.      Evaluate the case for the merger

·         What are the positives and benefits? What should work well?

·         What are the negatives and potential risks? What problems might occur?

Before the merger AG Barr was the maker of Irn Bru and Britvic was the producer of Tango. After the merger the new combined company is named as Barr Britvic Soft Drinks plc and its estimated annual sales is more than £1.5 billion.  After the merger, Britvic shareholders own 63% shares and AG Barr shareholders own 37% shares.

Followings are the positives and benefits of merger between AG Bar and Britvic:

ü  They will get a chance to cut their cost in difficult markets. Where AG Barr is strong in certain market, then it will be easier for Britvic to go in that market and vice-versa.

ü  The newly combined company will be benefited from scale production.

ü  Loyal customers of both the company will be buying the products of the newly merged company. There is a high chance of shift from another brand to the company’s brand.

ü  Britvic is a bottler for Pepsi by which Barr will be also be in relation with Pepsi. It will help to increase their sales. Also Barr will be able to sell their products to the customers of Britvic.

ü  Barr will get extra benefit as the main vision of merger is to get benefit. For instance, it owns 37% of the share of the combined company and will contribute to only 16% sales by which it will have a return of 23%.

ü  Britvic will also be benefited from the Barr. Barr makes an operating profit of 14%, where Britvic makes only 9%. Although Britvic’s half of the turnover comes from low margin bottling, Barr will help Britvic to narrow the gap.

ü  The company will also get huge cash flow which can be used to cover the debt of Britvic which is around £600 million. Britvic can take advantage to cover its debt because Barr is almost debt free.

ü  With the combination they will better get a chance to compete with coke by gaining some market shares.

Negatives and potential risks of merger between Barr and Britvic:

·         When merger takes place there is high chance to lay off their staffs. Here, Britvic will lay off their 500 staffs. By, doing so the employees remained in the company will feel unsecure and will not be motivated towards working.

·         Britvic owns 63% share and Barr owns only 37% share, however Barr seems to gain more benefit. Here, Barr contributes to 16% of the total sales and will get 23% revenue which might be disadvantageous to Britvic.

·         Barr getting in relationship with Pepsi does not mean that it will get benefitted. It is very hard to shift customers from one brand to another brand.

·         Although Barr will get a chance to sell their drinks to the Britvic’s customers but it might be very difficult in the case of French drinkers.

·         One of the most negative things is that Britvic has a net debt of £600 million whereas Barr is almost debt free. It may hamper the economic condition of the newly combined company. Also, if the debt of Britvic increases, the profit of Barr will be lowered.

·         If Britvic fails or go for bankruptcy, Barr too will be bankrupt. So, special consideration should be given.

·         Customer dissatisfaction for one product may hamper another product. For instance, if a loyal customer of Barr has a bad experience with the service or products of Britvic, then the customer may shift from Barr to other brand as Barr and Britvic are combined. Hence, there is a high chance of customers shifting to another brand because of their customers’ dissatisfaction.

·         Britvic’s half of the turnover comes from a low margin bottling hence, merger with Barr may not have helped Britvic to resolve their problems.

·         As market of soft drinks in UK is growing by less than 2%, merger between these two companies may not help to increase their market share significantly.

·         Although they owns decent brand but it might not be possible to compete with number one brand Coke.

2.      What advice would you give the newly formed Board?

·         The newly formed company should support each other brands.

·         They need to maintain an effective communication.

·         Also the newly merged company’s senior leaders can lead the effort.

·       The newly formed company may research its audiences. For instance, asking the audience what they want and how they wish to be connected with the company.

·         Training and supporting staffs and providing facilities, bonus and rewards.

·         Also if they need to hire people they need to hire most competitive people in their company.

·         The company should have the same vision and mission.

·         They should support each other in the marketing to gain more customers.

·         Shareholders of Britvic are little bit confused. So, management team must solve their problems.

·         They need to invest more capital so that it can go for large scale.

·         They need to develop strategies by which they can compete with Coke.

- In addition they need get synergies with annual savings, procurement savings and supply-chain  enhancement. 

                                                 

References:

Johnson, Whittington and Scholes (2011) Exploring Strategy, 9th Edition, Pearson Education, Chapter 6

Johnson, Whittington and Scholes (2011) Exploring Strategy, 9th Edition, Pearson Education, Chapter 10

Phillippe Haspeslagh, 1999, FT Mastering Strategy.

P. Gaughan, Mergers, Acquisitions and Corporate Restructurings, 4th edition, Wiley, 2007.

G. Johnson and K. Scholes (eds), Exploring Techniques of Analysis and Evaluation in Strategic Management, Prentice Hall, 1998.

J. Bower, ‘Not all M&As are alike’, Harvard Business Review, vol. 79, no. 3 (2001), pp. 93–101.

Y. Doz and G. Hamel, Alliance Advantage: The art of creating value through partnering, Harvard Business School Press, 1998 

 [Accessed on 16th March, 2013]

http://www.thompsondunn.com/newsletter3/article7.htm

[Accessed on 16th march, 2013] 

Assignment of week 16

1.    In your own words and using referenced quotes describe the difference between organic growth, merger & acquisition and strategic alliance.

The difference between organic growth, merger & acquisition and strategic alliance are as follows:

Organic growth:

Organic growth is sometimes known as ‘organic development’. It has been considered as the main and primary method of strategy development. It is a strategy where an organization builds its own capabilities. This is a strategy of “Do it yourself”.

Merger and Acquisition:

Ø  A merger is the combination of two previously separate organizations, typically as more or less equal partners.

Ø  An acquisition involves one firm taking over the ownership (equity) of another n hence the alternative term ‘takeover’.

Strategic Alliance:

A strategic alliance is where two or more organizations share resources and activities to pursue a strategy. There are two main kinds of ownership in strategic alliances:

Ø  Equity alliances involve the creation of new entity that is owned separately by the partners involved.

Ø  Non – equity alliances are typically looser without the commitment implied by ownership.

The main differences between organic growth, merger & acquisition and strategic alliance are as follows:

Urgency:

The internal development of organizations might be very slow. Due to lack of experience, expertise marketing skills it may take a long time and the development of capabilities might be outdated. For example, if a newly launched product wants to manufacture raw materials using its capabilities, it may not be relevant.

Alliance can little bit accelerate the process. We must remember in alliance two or more organization cooperates with each other to pursue new industry.

On the contrary, acquisition is the quickest method of strategy development.

Uncertainty:

In alliance failure does not indicate the full cost is loss as alliance is risk sharing. On the other hand, failure of organic growth and acquisition may incur a huge loss.

Types of capabilities:

Organic growth best work with soft resources rather than hard resources. There will be a cultural consistency because the capabilities are developed with an organization. Acquisition best work with hard resources and cultural and valuation problems may arise. Strategic alliance may face difficulties like culture and control problems.

Modularity of capabilities:

Organic growth will be the best strategy if an organization is willing to develop in new venture units. Strategic alliance will be best if the organization has the ability to alliance with relevant partner unit. But in acquisition organization might feel difficulties in buying the whole organization.

2. Give an example of a company that has grown through a) organic growth, b) merger or     acquisition and c) strategic alliance.

Example:

The organic growth of Procter & Gamble in 2006 , which the company’s personal care and beauty sales continued to provide organic development to the company which would exclude any contribution from Gillette, which was acquired by Procter & Gamble during the prior year.

Organization that has grown through Merger or acquisition:

Merger:

Disney-Pixar

The Walt Disney Company bought Pixar at a valuation cost of $7.4 billion deal. a transaction which made Jobs Disney's largest shareholder. It is regarded as one of the most successful merger examples in history of growth strategies.

                               

Sources: http://chriswoodhead.blogspot.com/2012/03/mergers-and-acquisitions-is-bigger.html

Acquisition:

Procter & Gamble and Gillette

Procter & Gamble announced the largest acquisition in its history, agreeing to buy Gillette in a $57 billion deal that combines some of the world's top brands and could lead to further mergers involving products consumers know and love.

   

                                     

                 

Organization that has grown through Strategic Alliance:

Nokia and Microsoft

Nokia and Microsoft on 11^th February, 2011 announced plans to form a broad strategic partnership that would use their complementary strengths and expertise to create a new global mobile ecosystem. Nokia and Microsoft intend to jointly create market-leading mobile products and services designed to offer consumers, operators and developers unrivaled choice and opportunity. As each company would focus on its core competencies, the partnership would create the opportunity for rapid time to market execution. Additionally, Nokia and Microsoft plan to work together to integrate key assets and create completely new service offerings, while extending established products and services to new markets.

                                           

Figure: Strategic Alliance of Nokia and Microsoft

3. Briefly discuss the merger between Britvic and AG Barr. What advice would you give to the new Board?

  

Before the merger AG Barr was the maker of Irn Bru and Britvic was the producer of Tango. After the merger the new combined company is named as Barr Britvic Soft Drinks plc and its estimated annual sales is more than £1.5 billion.  After the merger, Britvic shareholders own 63% shares and AG Barr shareholders own 37% shares.

Followings are the positives and benefits of merger between AG Bar and Britvic:

Ø  They will get a chance to cut their cost in difficult markets. Where AG Barr is strong in certain market, then it will be easier for Britvic to go in that market and vice-versa.

Ø  The newly combined company will be benefited from scale production.

Ø  Loyal customers of both the company will be buying the products of the newly merged company. There is a high chance of shift from another brand to the company’s brand.

Ø  Britvic is a bottler for Pepsi by which Barr will be also be in relation with Pepsi. It will help to increase their sales. Also Barr will be able to sell their products to the customers of Britvic.

Ø  Barr will get extra benefit as the main vision of merger is to get benefit. For instance, it owns 37% of the share of the combined company and will contribute to only 16% sales by which it will have a return of 23%.

Ø  Britvic will also be benefitted from the Barr. Barr makes an operating profit of 14%, where Britvic makes only 9%. Although Britvic’s half of the turnover comes from low margin bottling, Barr will help Britvic to narrow the gap.

Ø  The company will also get huge cash flow which can be used to cover the debt of Britvic which is around £600 million. Britvic can take advantage to cover its debt because Barr is almost debt free.

Ø  With the combination they will better get a chance to compete with coke by gaining some market shares.

Following are the negatives and potential risks of merger between Britvic and Barr:

·         When merger takes place there is high chance to lay off their staffs. Here, Britvic will lay off their 500 staffs. By, doing so the employees remained in the company will feel unsecured and will not be motivated towards working.

·         Britvic owns 63% share and Barr owns only 37% share, however Barr seems to gain more benefit. Here, Barr contributes to 16% of the total sales and will get 23% revenue which might be disadvantageous to Britvic.

·         Barr getting in relationship with Pepsi does not mean that it will get benefited. It is very hard to shift customers from one brand to another brand.

·         Although Barr will get a chance to sell their drinks to the Britvic’s customers but it might be very difficult in the case of French drinkers.

·         One of the most negative things is that Britvic has a net debt of £600 million whereas Barr is almost debt free. It may hamper the economic condition of the newly combined company. Also, if the debt of Britvic increases, the profit of Barr will be lowered.

·         If Britvic fails or go for bankruptcy, Barr too will be bankrupt. So, special consideration should be given.

·         Customer dissatisfaction for one product may hamper another product. For instance, if a loyal customer of Barr has a bad experience with the service or products of Britvic, then the customer may shift from Barr to other brand as Barr and Britvic are combined. Hence, there is a high chance of customers shifting to another brand because of their customers’ dissatisfaction.

·         Britvic’s half of the turnover comes from a low margin bottling hence, merger with Barr may not have helped Britvic to resolve their problems.

·         As market of soft drinks in UK is growing by less than 2%, merger between these two companies may not help to increase their market share significantly.

·         Although they owns decent brand but it might not be possible to compete with number one brand Coke.

Advices and suggestion for newly merged company:

·         The newly formed company should support each other brands.

·         They need to maintain an effective communication.

·         Also the newly merged company’s senior leaders can lead the effort.

·         The newly formed company may research its audiences. For instance, asking the audience what they want and how they wish to be connected with the company.

·         Training and supporting staffs and providing facilities, bonus and rewards.

·         Also if they need to hire people they need to hire most competitive people in their company.

·         The company should have the same vision and mission.

·         They should support each other in the marketing to gain more customers.

·         Shareholders of Britvic are little bit confused. So, management team must solve their problems.

·         They need to invest more capital so that it can go for large scale.

·         They need to develop strategies by which they can compete with Coke.

Sources: http://animal-chin.tumblr.com/post/6702845790/the-ingredients-in-irn-bru-are-a-secret-and-the

Sources: http://www.echoarena.com/news/britvic.asp

References:

Johnson, Whittington and Scholes (2011) Exploring Strategy, 9th Edition, Pearson Education, Chapter 6

Johnson, Whittington and Scholes (2011) Exploring Strategy, 9th Edition, Pearson Education, Chapter 10

P. Gaughan, Mergers, Acquisitions and Corporate Restructurings, 4th edition, Wiley, 2007.

G. Johnson and K. Scholes (eds), Exploring Techniques of Analysis and Evaluation in Strategic Management, Prentice Hall, 1998.

J.F. Mognetti, Organic Growth: Cost-Effective Business Expansion from Within, Wiley, 2002.

Assignment of week 15

CASE STUDY

1.  Why has this artist been so successful? What are her key sources of sustainable competitive advantage? Think about her unique resources and core competencies, think about how she has responded to changes in the external environment, why is she difficult to imitate?

Madonna is an American singer, actress, writer, dancer and entrepreneur. She is so successful that no one can be compared with Madonna.  Ruling the music industry for 30 years is not a small thing. Simply, she was successful because of her strategy. As the time changes, she also changed her strategy in order to sustain in the industry.

So how has Madonna been able to maintain her incredible success? The answer to this question lies in five key ingredients of successful strategy that are equally relevant to companies and individuals. These five strategies have provided the foundation underpinning Madonna’s stardom, and if diligently pursued can provide the ingredients for sustained company and career success. The five strategies are as follows:

Elements of Madonna’s Success

1. Vision.

Madonna has demonstrated a clear commitment to super-stardom goal that was pursued with single-mindedness throughout her career. Other dimensions of her life have been either subordinated to or absorbed within her career goals. Rather than wait for industry trends, she has acted to shape the world around her.

2. Deep understanding of consumers and the industry environment.

Madonna has developed her strategy through a deep and insightful appreciation of customers and the music industry. Critical to her continuing success has been a deep understanding of the ingredients for sustaining popular appeal.

3. Leveraging competences and addressing weaknesses.

Madonna has been able to exploit her abilities to develop and project her image and to exploit emerging trends, while protecting areas of weakness. Her weaknesses have been more than compensated for by her use of an extensive network of support personnel, including musicians, technologists, producers, dancers, and designers. Her personal relationships have often been important in building her career.

4. Consistent Implementation.

Without consistent implementation, even the best strategies are unlikely to succeed. Madonna has surrounded herself with individuals and organizations that have enabled her to deliver upon her vision. Through her various companies, such as Maverick, she built organizations that allowed effective marshaling of resources and capabilities, and quick responses to changes in the competitive environment.

5. Continuous Renewal

A key ingredient of Madonna’s success has been her ability to renew her popularity again and

again .She is known as the ‘queen of reinvention’ within industry circles. Compare her abilities in re-invention to many’ one-hit-wonders’ in the music industry, or to performers such as the Rolling Stones who have enjoyed long periods of success, but whose fan-base has aged or remained largely unchanged.

Madonna’s strategy from 1893-2010 by which she has responded to change

•      No frills (1983 A.D.)

Low price/Low added value

An opportunity for a new entrant to carve out a niche or to use no frills as a bridgehead to build volume before moving to other strategies” As Madonna was new to the industry it was important for her to have something unique and innovative. Her voice, looks and dancing style were her unique resources for her.

•      Differentiation (1984 A.D.)

She provides products/services that offer benefits different from those of competitors and widely valued by the audiences.

•      Focused differentiation (1985-2013 A.D.)

Her high perceived benefits justifying a sustained price premium usually to a selected market segment made her to be a sustainable in the market. Her songs are regarded as a premium product and they are heavily branded. Also the image and brand of Madonna was difficult to imitate.

1.   What strategy directions could the artist pursue over the next ten years to continue her commercial success?· Consider each of the four boxes from the Ansoff matrix. What new products or markets could she enter? How might she diversify or continue to penetrate her existing market? Try to think logically but also creatively and innovatively.

ANSOFF MATRIX FOR MADONNA

Market Penetration Target different geographical markets at home or abroad. Target different groups of people, perhaps with different age groups, genders or demographic profiles from normal customers.	New products and services Involve in new business.
Market Development Advertise, to encourage more people within an existing market to choose your product, or to use more of it. Introduce a loyalty scheme. Promotions. Increase sales force activities. Buy a competitor company (reputed music company or production house)	Conglomerate Diversification Launch music in foreign language for foreign audience. Active involvement in politics.

References:

• H.I. Ansoff, Corporate Strategy, Penguin, 1988, Chapter 6

• Johnson, Whittington and Scholes (2011) Exploring Strategy, 9th Edition, Pearson Education, Chapter 7

• ‘Bennett takes the reins at Maverick’, Billboard Magazine, 7 August (1999); ‘Warner Bros expects Madonna to light up international markets’, Billboard Magazine, 21 February (1998).

• ‘Maverick builds on early success’, Billboard Magazine, 12 November (1994)

• 1994); A., Jardine ‘Max Factor strikes gold with Madonna’, Marketing, vol. 29, (1999), pp. 14-15

Assignment of week 14

1.  In your own words and using referenced quotes describe the difference between ‘business unit level’ strategy and ‘corporate level’ strategy?

    Business Unit Level Strategy:

    The way business seeks to compete successfully in the market is called business unit level strategy. It is the decision a company takes on its way to maintain, create and use its competitive advantage. A strategic business unit is a semi-autonomous unit for an organization. This unit is responsible for its own price setting, budgeting and new product decision. The corporate headquarter consider Strategic Business Unit as an internal profit Center.

Bases of Competition         Price         Differentiation         Hybrid         Focus		Achieving Competitive Advantage         Sustainability         Hyper competition         Collaboration         Game Theory
	SBU Strategies
	Detailed Choices         Directions         Methods

                                                         Figure: Business Level Strategies

  Corporate level strategy:

Corporate level strategy is all strategic decision that affects the firm as a whole. It is concerned with overall purpose and scope of an organization. Adding value to its business unit is the main objective of corporate level strategy. The Corporate level strategies affect the matters such as deciding the size and composition of business portfolio of the overall firm.

Differences between Business Unit Level Strategy and Corporate Level Strategy:

   Business-Level Strategy

   Business level strategy is low-level strategy that applies to a single division or business unit. Business-level strategic issues include pricing and marketing strategies. Business-level strategies are normally decided by mid-level managers who are responsible for the business unit or division.

    Corporate-Level Strategy

       Corporate strategy refers to all strategic decisions that affect the firm as a whole. Often, corporate-level strategies will have an affect on several business units. Corporate strategic issues include the financial structure of the firm, mergers and acquisitions, and the allocation of resources to individual business units. Corporate strategic decisions are normally made by the board of directors.

2.      Discuss the corporate parenting style of Virgin group.

    The Virgin group is one of the one of the UK’s largest private company. According to 1996 survey, 96% of UK consumers were aware of the brand Virgin.

   Virgin has been described as a “keiretsu” organization. Further, the Virgin Group had controlled by Mr. Richard Branson. His approach to management style was one that decentralized decision making and responsibility of the own development. Branson ruled by delegating power to managers, however when it came to marketing and promotion, he would take more involved role.

    The name Virgin was chosen so that the brand can be remained virgin in every business it enters. Virgin’s expansion into new markets had been through a series of joint venture whereby Virgin provided the brand name and the partner provided the majority capital. It is involved in mobile telephony, travel, financial services, leisure, music, holidays and health and wellness. It partners with others and transfers and combines skills, knowledge and operational expertise from a wide range of industries. Also, Virgin Group Company is able to run their business by their self. Further the company actively helps each other to solve problems.

    Virgin is involved in not only commercial activities but it is involved in finding solutions to world major issues or problem. With the help of Virgin Unite, a nonprofit foundation, it is organizing campaign like health, economic empowerment, conservation and climate change.

    By observing the ownership, the corporate structure and the management style of Virgin Group, we can say that Virgin is following the Synergy manager corporate parenting style. The synergy manager is a corporate parenting style looking to enhance value across business units by managing synergies across business units. We can easily say that Virgin is following synergy manager corporate parenting style because of the following reasons:

Resources and activities are shared:

Virgin group use common distribution system across its business. It uses the same from brand name for each of its products and services. In many of the countries its offices are shared by its smaller business units depending upon the geographical diversity.

Skills are transferable:

Virgin Group also actively transfers their skills to the required industry. For example Virgin Music can transfer its skill to Virgin Cinema and vice-versa to improve its technology. Further, Virgin Group has its own value adding capabilities by which one business unit help each other in sharing technologies, skills and knowledge. The accumulated knowledge and skills learned in one business is utilized in another business unit in the Virgin Group. This has helped Virgin Group to increase its performance. In addition, marketing and R&D are the expertise skills which are used by Virgin Group to improve the performance of the newly launched products.

    References:

• Johnson, Whittington and Scholes (2011) Exploring Strategy, 9th Edition, Pearson Education, Chapter 1 

• Johnson, Whittington and Scholes (2011) Exploring Strategy, 9th Edition, Pearson Education, Chapter 7 

• De Wit, B and Meyer, R (editors) (2010). 4th Edition Strategy: Process, Content, Context, Thomson International Business Press: London. Chapter 6 

Case study of week 14

1.  What type of corporate parent is Virgin (portfolio manager, synergy manager or parental developer)?

Virgin Group is a portfolio manager corporate parent. The Virgin group is one of the one of the UK’s largest private company. According to 1996 survey, 96% of UK consumers were aware of the brand Virgin.

Virgin has been described as a “keiretsu” organization. Further, the Virgin Group had controlled by Mr. Richard Branson. His approach to management style was one that decentralized decision making and responsibility of the own development. Branson ruled by delegating power to managers, however when it came to marketing and promotion, he would take more involved role.

The name Virgin was chosen so that the brand can be remained virgin in every business it enters. Virgin’s expansion into new markets had been through a series of joint venture whereby Virgin provided the brand name and the partner provided the majority capital. It is involved in mobile telephony, travel, financial services, leisure, music, holidays and health and wellness. It partners with others and transfers and combines skills, knowledge and operational expertise from a wide range of industries. Also, Virgin Group Company is able to run their business by their self. Further the company actively helps each other to solve problems.

Virgin is involved in not only commercial activities but it is involved in finding solutions to world major issues or problem. With the help of Virgin Unite, a nonprofit foundation, it is organizing campaign like health, economic empowerment, conservation and climate change.

2.   How does the Virgin Group, as a corporate parent, add value to its businesses?

Virgin as a portfolio manager corporate parent it is adding value by sharing resources and activities, technologies, etc.

Resources and activities are shared:

Virgin group use common distribution system across its business. It uses the same from brand name for each of its products and services. In many of the countries its offices are shared by its smaller business units depending upon the geographical diversity.

Skills are transferable:

Virgin Group also actively transfers their skills to the required industry. For example Virgin Music can transfer its skill to Virgin Cinema and vice versa to improve its technology. Further, Virgin Group has its own value adding capabilities by which one business unit help each other in sharing technologies, skills and knowledge. The accumulated knowledge and skills learned in one business is utilized in another business unit in the Virgin Group. This has helped Virgin Group to increase its performance. In addition, marketing and R&D are the expertise skills which are used by Virgin Group to improve the performance of the newly launched products.

Other value-adding skills of Virgin Group

Envisioning (developing strategic mission, clear external image)

Intervening (Challenging/ Developing Strategy)

Coaching and Training (Developing strategic capabilities, achieving synergies)

Central Services (Scale advantages, Transferring managerial skills)

Expertise (Knowledge sharing, leverage, brokering)

3.  What’s the logic of portfolio? Why do you think they are in mobile telephony, travel, financial services, leisure, music, holidays and health & wellness?

The main aim of portfolio is to balance the business. It will help your business to adjust your profit and loss. There are different risks in different types of business, some have higher risk and some have lower risk. To solve this portfolio exist. It will help the investor to invest in different business rather than a single business where the risk is higher. There are several portfolio models available which will help corporate parent to manage their portfolio business. They are Boston Consultancy Group (BCG) matrix, the directional policy matrix, parenting matrix, etc.

Virgin is involved in different sectors such as mobile telephony, travel, financial services, leisure, music, holidays and health and wellness. As some of the businesses are more risky it has invested in another business to adjust the loss from another business. Virgin Atlantic was the big success in 2003, but as it is a cyclical nature of business it might reach to worst condition by which not only the Virgin Atlantic will be affected but as a whole Virgin Group will be affected .So in order to minimize that risk Virgin Group might have been involved in more than 250 businesses. Further, by increasing the business unit, it can make more profit as well as minimize the loss for risky business. With the beginning of 21^st century, Virgin expanded its business to telecommunication, financial services. Hence, Virgin is increasing its portfolio investment in order to minimize the risk.

4.What are the main risks facing Virgin Group as a result of their strategy? How might they be reduced?

Every company faces risk as a result of their strategy. The most important asset of Virgin Group is its brand. The strategy of boosting up the brand might be dangerous. For example a customer enjoying a nice holiday’s package on a Virgin Holidays may be happy to use Virgin Mobile, but a customer who has a bad experience in any one of the product and services might avoid all the products and services of Virgin Group.

A real time example of Virgin can be shown by which it will be clearer. In the UK, the excellent service of Virgin Airlines and the terrible reputation of Virgin Railways remained unsolved by 2004, by which the loyal customer of Virgin Group were in dilemma whether to consider Virgin group a good or bad company.

Another issue relating to Virgin group is Branson himself. He was closely linked with Virgin Brand, there is also risk of weaken the value of Virgin brand if some of his high profiled marketing ventures failed. The main issue is what will happen to Brand Virgin after Richard Branson.

In order to face with the above risks Virgin Group needs to develop new strategy by which the risk might be minimized. The leadership and control over Virgin group should be more decentralized so that the impact of Branson can be lowered. Also Virgin needs to be less diversified. in addition, every effort should be made to bring in line the accounting year end date for all businesses in the Virgin Group to be on the same date.

References:

Johnson, Whittington and Scholes (2011) Exploring Strategy, 9th Edition, Pearson Education, Chapter 1

Johnson, Whittington and Scholes (2011) Exploring Strategy, 9th Edition, Pearson Education, Chapter 7

De Wit, B and Meyer, R (editors) (2010). 4th Edition Strategy: Process, Content, Context, Thomson International Business Press: London. Chapter 6