Virgin Group Growth Strategy - Essay Example

Virgin Group Growth Strategy Introduction Growth strategies are the measures put into place within an organization to ensure that the company attains its objectives of growth in volume and turnover (Grant, 2013). Growth strategies are categorized into four broad classes. These are product development, market development, diversification, and market penetration (Grant, 2013). A growth strategy purposes to achieve bigger market share while paying less attention to short term profits. Each of these growth strategies plays particular roles in ensuring that a company acquires bigger market shares for long-term benefits rather than short-term course profit. Product development strategy involves the creation of completely or slightly dissimilar products from the existing products. The new product contains added benefits and satisfies the customer’s new desires caused by changing trends (Grant, 2013). Diversification strategy is primarily used in businesses despite being a highly risky operation. Diversification encompasses introduction of a new product to a completely new environment or market. Needless to say, diversification does not guarantee success to a new business venture and this makes a business that adopts it vulnerable to losses. On the other hand, market penetration strategy involves marketing the same product in the same market with the ambition of attaining more market shares. This is primarily done by lowering the prices of the products (Grant, 2013). Notably, acquisition is a new growth strategy in which the business buys another company so as to develop its activities and operations. Market development growth strategy involves enlarging the market to which the goods or services are to be purchased. In essence, it expands the overall market for a particular product, service or a business. This requires an organization to lay down comprehensive and diverse procedures in order to expand its market. Conversely, an organization can try venturing into new sectors of the market, which, in turn, broadens the markets served by the company products or services. Additionally, this strategy also entails entering more than one segment of the market. The more the number of segments a business ventures the greater its market is expanded (Grant, 2013). An organization can correspondingly convert the potential customers to active customers by adding value or flavour to their products and services. Potential customers are the customers’ who can purchase the product, but do not purchase it because of unknown reasons. Changing the non-users to users expands the market available to the company. Market expansion can similarly be made by raising the usage rate per single user. This leads to increased units of goods a customer buys at particular time. Virgin group Virgin Group Limited is based in the United Kingdom. It was started in 1968 with very little capital and assets by Richard Branson (Grant, 2013, p. 699). Currently, the corporation has impressively expanded and is the most popular brand in the United Kingdom. The Virgin Group holds more than 200 companies that are based on five pillars. These pillars are personal finance, travel, entertainment retailing, leisure and mobile phones. The basis of the group is to venture into many businesses that are conceivable and spread the brand name as far as possible. Presently, the organization has managed to diversify its business and globalize its companies. The group founder Richard Branson succeeded in recruiting managers who share the same personalities with him (Grant, 2013). The managers are innovative and possess exceptional management skills. Branson gives the managers the freedom to make choices and decisions, which gave them a sense of responsibility and strength to propel the business. A unique factor about Virgin’s group is that each business is independent and manages its own finances. However, Virgin Group needs a growth strategy. It needs market development growth strategy to broaden the market beyond its current state. The company requires increasing the number of customers buying their products and services not only within United Kingdom, but also the other parts of the world. However, according to the case study by Grant (2013), the group has taken steps in this approach to introduce their business to other countries but has attained little success. Some of the countries that the group has introduced its companies are United States, Japan and South Africa. In 1998 to 2011, Virgin group tried these international expansions and attained success outside the UK. These international expansions were concentrated mainly in Australia, North America and South Africa (Grant, 2013, p. 696). To such a significant Group like Virgin’s, these are very few overseas countries for market expansion. Bearing in mind that the Group is spread all over United Kingdom, it implies that the only option for growth is market development. United Kingdom is almost saturated with Virgin’s brand and these will block any potential market expansion within the country. The group should venture into other continents and countries where its brand is still unknown. This will have the effect of increasing the customers willing to buy their products and lead to high sales and profits. The group can introduce Virgin Airline services to countries like China, Russia and Nigeria. Similar thing should be done to the other successful companies within the Virgin Group in U.K. In this market expansion strategy, there is a lot the group can do. The group can identify some of its companies that have low sales and turnover in United Kingdom, and find means of expanding their market. Companies like Virgin Atlantic Airways can be made available to other customers in different cities in U.K. The basic idea is that the Group has not yet made adequate advances in market expansion of some products to other foreign countries (Grant, 2013). There are numerous opportunities outside the United Kingdom where Virgin’s innovative and experience based business ideas can flourish. In addition, the company also needs to adopt acquisition strategy for more rapid expansion of its market shares. The group should recognize well performing companies and purchase them to become their own. Notably, this is less risky since the business to be purchased is already established and doing great in the market. The Virgin group, following the decisions of Branson, has been selling most successful companies instead of keeping them. Branson explains that selling the companies generates capital to uplift less performing companies (Grant, 2013, p. 700). From an entrepreneurial point of view, the sole purpose for a business is not only to offer services and products but to generate income. In this case, Branson should sell the less performing businesses and purchase newly established companies in the market. Branson and his management team should try out this new strategy to win more market share and gain competitive advantage in the market. Virgin’s successful past does not mean it is not eligible to utilize the growth strategies. Most of its success is solely dependent on the organization’s brand name, which is respected in United Kingdom and is the people’s preferred brand (Grant, 2013). On the other hand, a successful organization like Virgin does not require some of the growth strategies to experience additional growth. Diversification is one of the strategies the group does not need at present. The process of diversification not only necessitates an expensive and thorough analysis of the new market but also a risky tactic (Grant, 2013). The group is currently much diversified, possessing more than 200 companies in United Kingdom that offer different services and products. About 68 companies have been dissolved following a failure to thrive in the market (Grant, 2013, p. 701). This makes the strategy risky as there is no guarantee for success in the market. The group, having succeeded in several markets in U.K, should employ other growth strategies such as market and product expansion of some of the most successful companies under its management. Additionally, the group should focus more on quality improvement and maintenance. If one of the diverse businesses bearing the group’s name starts producing poor quality products and services, the entire brand is spoilt and the Virgin’s reputation is damaged. Conclusion There are various growth strategies being employed by companies today. These strategies include diversification, market penetration, and product and market expansion. Virgin Group, led by the forefather Richard Branson, has shown success over the last forty years having developed from scratch to a company that is currently reporting annual sales of about 10 billion US dollars. This group is already successful but still requires growth strategies such as market expansion, acquisition and globalization. On the contrary, the group no longer needs diversification strategy due to its present market position and perils involved in the strategy. Reference Grant, R. M. (2013). Contemporary Strategy Analysis. Wiley. Read More