Virgin group: reaching for the sky in a new economy - Essay Example

Critique – Virgin Group Introduction The Stanford encyclopedia of philosophy describes business ethics as an applieddiscipline in which the moral attributes of commercial activities are addressed within the fabric of the firm. Recently academic business ethics are founded particularly on the concept of corporate social responsibility. It addresses issues across the wide functional aspects of business operations by firms. Thereby, leading to the origin of specialized business ethics relating to the particular operative areas of business e.g. accounting ethics, marketing ethics, human resource ethics and so on, so forth. Business ethics broadly postulate that the conduct of business in the pursuit of capitalism must not supersede the greater interest of the society where the business operates. This constitutes the fundamental unit of commerce today (Solomon). Kant, a renowned theorist in business ethics argued in the defense of the principle of respect for persons that any commercial practice that puts money at an equal with people was immoral (Bowie). Several theories advance the individual’s business ethical obligations including the stockholder theory, stakeholder theory, social contract theory, and the utilitarian theory. These normative theories more or less argue about the question of what needs to be done such as to produce the best possible consequences for all involved. Presently, the question of what exactly is the best practice continues to be equally challenging as long ago when it was conceived. It has been argued that business ethicists are more often than not academics and philosophers who find their stance in abstract ethical theory (Wood). Therefore, the practical use of business ethics conflicts with the fundamentals of a business practitioner who avoids abstractions in making business decisions. Despite this, calls for social responsiveness in business continue to gather momentum globally where businesses that tow this line reap rewards including but not limited to profitability, expansion, and survival due to societal acceptance. Those who fail to adhere to such calls are often met with disapproval within the community; and in more developed countries, direct public protests and interventions have intimated legal undertakings towards this end and closure of operations for non-compliance (Complaintsboard). The Virgin Group through its numerous businesses seems to have understood the importance of “ethical business.” Virgin employees and businesses seem to follow the principles of their founder, Sir Richard Branson, who has an ability to ethically profit from emerging markets. The group is essentially driven by the goals of high entrepreneurial and ambition with a unique customer focus aimed at changing the way all other industry participants do business. As opposed to traditional methods of gaining market supremacy through economies of scale, Virgin Group employs a smart approach geared at redefining how customers view the delivery of required goods and services should be done. This paper will assess whether and how the needs of stakeholders have been ethically addressed by the Virgin Group. In addition, it will-more specifically-identify the group’s implementation of business ethics with regard to the protection of intellectual property rights. Is there a connection between the firm’s focus on ethics in business practice and its continued success? Analysis Ethics and morals have a close intertwined relationship, which generates signals as to the kind organizational culture of a business. This culture in turn influences and enforces behavior and interactions amongst the various stakeholders within the organization. However, what exactly is it in a decision or policy that is moral and, by extension, ethical? How does one ascertain the nature of an action before its resultant effects have occurred thus providing a basis for assessing the given action? Can ethical practices by one group of stakeholders negatively affect the needs of another group of stakeholders? The Deontological theory is a class of ethical theories involving moral rules. It adopts two approaches: a non-consequential approach where the results of an action are not considered in determining the decision i.e. the rule is the rule and as such, the morality of the action does not arise from its consequence as much as it does from the decision itself. In consequential approaches, the outcomes of an action are considered as part of the process of decision-making. In this regard, the morality of an action is split as between the action and the decision maker (Ferrel, Fraedrich and Ferrel). Kant, a well-known deontologist, argued that morality and ethics were as a function of duty. He argued, “The highest good is that of good will”; therefore, acting out of good will is to act out of duty. Subsequently, it is the intention behind an action rather than the consequences of said action that makes it moral or ethical (Bowie). The stakeholder theory has two aspects: as an empirical theory in management and as a normative theory in business ethics. In the former, it postulates that for there to be effective management, a balanced attention to and consideration of legitimate interests of all stakeholders must be present. Herein, stakeholders refer to all group(s) of individuals who either influence and/or are influenced by the organization. Applicably, this means that financial success in the firm is best achieved where management takes consideration of the firm’s stockholders (owners), employees, customers, suppliers, management, and the society where it operates. Secondly, as a normative theory in business ethics (and this is our primary concern), considers a moral rule that is set to apply to all. It postulates that whether or not a stakeholder-focused management leads to profitability. Managers should administer the business for the benefit of all stakeholders generally. Therefore, it implies that the firm has social obligations to the firm’s stakeholders and does not view the firm as a conduit for increasing stakeholders’ financial earnings but as a mechanism for minimizing conflicts between these interest groups. The stakeholder theory emphasizes that the primary and essential role of management is not to maximize the financial returns to the firm but ensure its “going concern” through a balance of conflicting and emerging claims by its various shareholders. This constitutes the moral fabric of the firm where the stakeholders serve as moral agents (Ferrel, Fraedrich and Ferrel). The principle of utility is based on the concept of satisfaction versus dissatisfaction. In this respect, what is ethical and even moral is determined by what effect the desired action will generate. The theory claims that an action is right if it generates “just as much or more than par” a rise in happiness of all stakeholders by it than any other action, and wrong where it does not (Mill). However, this theory fails to distinguish more specifically about the nature of the action. It instead proposes that the values enjoyed are universal (common) and that they are equally distributed. Therefore, it fails to make cognizance of the fact that there are differences between groups as much as there are differences amongst individuals. Virgin Group’s ethical and moral role is coined in its objective of providing unique, enjoyable and quality customer service at most affordable pricing. To this end, the group “refuses to follow the industry leaders.” Sir Branson, as well as the Virgin Group, do not necessarily venture into business to make profits. The goal of profitability is only important as a tertiary by-product of the group’s need to redefine and amend the manner with which business within an industry ought to be done; with an underlined focus on enhancing the customer experience. The group relies on extensive market research and analysis that examines the current competitor(s) product versus the customer satisfaction. By pitching themselves from the customer’s perspective, the group is able to identify areas for value adding which curves a market niche for the group’s entry into the market. As regards the creditors, the group uses solely high net-worth private individuals as partners for their start-ups. The group provides the greater portion of the funds necessary to run the business in exchange for the brand name and a controlling interest in the businesses. This strategy ensures that the Virgin Group is well sheltered from the effects of illiquidity whenever one of its major businesses falls into financial challenges. The ownership by stockholders is maintained, and the interests of creditors (in this case financiers) to make returns on their loan capital is also satisfied. The Virgin Group is also involved in corporate social efforts that are geared towards improving the greater welfare of the community where it operates. Initiatives such as the Virgin earth challenge are designed towards encouraging more sustainable commercial practices with minimal impact onto the earth’s atmosphere. To this end, the group has hived off US$ 25 million for the most viable projects by members of the public. The employees of Virgin Group are afforded ample space to enhance creativity, and they are allowed to present the results of such creativeness before the management team. The group to this end is famed for its open-minded approach to new ideas, which are aimed at keeping it ahead of the competitors especially within the premise of emerging business. The transformative leadership style of the founder cannot be overlooked. His unique vision and go-getter attitude is notably synonymous with the business growth and focuses over the last decade. The leadership style is cemented on a personal and strong work ethic complimented by the strong relationships between the founder, employees and financiers globally; as well as between the employees themselves. This leadership style is moral as it allows for the identification, empowerment and coaching of the staff (Weiss). The resultant effect of such an enabling environment is that the level of conduct and aspirations of both management and leadership are uplifted, subsequently transforming both. Intellectual property rights are a collection of legal doctrines that assist in regulating the use of various original works of creativity. These works include ideas, discoveries, inventions, and insignia. Presently, the importance of intellectual property rights is crucial for ensuring that the creators of such original works maximize the economic gain from them especially in light of the ever-increasing risk of duplication. Such intellectual property rights can be broken down into: copyright laws, patent laws, trademark laws, trade-secret laws, and right of publicity. Theories formulated are heavily dependent on ideas formed and reiterated by judges, legislators, and lawyers. They include the personality theory, utilitarianism, labor theory, and the social planning theory. The widely held view is such that one who creates an item of value justly is entitled to the full enjoyment of the fruits of this labor. Virgin Group is estimated to have 200 companies globally operating under the Virgin brand and employing over 50,000 people in over 29 countries (Goodall, Goodall and Schiefelbein). Its operations are spread out as between mobile telephones, transportation, financial services, leisure, music, publishing, holiday, and retail. Key to this diversification is the constant and deliberate search for new potential start-ups. The group has built up a warm, receptive culture for new and budding entrepreneurial ventures. The group has a clear policy on the core attributes for all entrepreneurs who wish to be accommodated under their umbrella brand. Proposals are sought after through the Virgin Group website. The threshold being uniqueness, fun, and profitability. The group has an explicit policy regarding new proposals submitted to the firm. In addition to adhering to the relevant intellectual property rights in each country where the new ideas originate and may be registered; the group undertakes its own assessment on the feasibility of the project. Owing to the high number of proposals received, the firm evaluates the proposals on several core parameters: nature of the product or service. Those proposals that pass the threshold are absorbed and taken up for the next level towards their establishment. Those that do not are incubated and communicated to the individuals appropriately. Findings and Conclusions The Virgin Group seems to have adopted a unique strategy that incorporates vision, innovation and a desire for enjoyment in identifying, establishing, and operating profitable enterprises. The leadership and influence of the founder is very invaluable in this end. Sir Branson can be credited with establishing a strong work ethic, which has propelled the business from such humble beginnings of a school paper to what is now considered an epitome of entrepreneurship, innovation, and ambition. The growth of the Virgin Group can be pegged alongside the personal growth of the founder. The desire for the group to remain predominantly privately owned points to the direction of the firm to build the largest global empire founded on an undefeatable policy of unique customer satisfaction. Due to its international operations in 29 countries, learning about other people’s cultures especially in areas of operations serves as an excellent way in building a repertoire of cross-cultural and intercultural skills. This allows both the firm and employees to display respect and appreciation towards other cultures; in so doing, the image of the firm internationally is enhanced. An understanding of the collective cultures versus individualistic cultures helps in determining the type of products or services that can be developed for this type of market (Goodall, Goodall and Schiefelbein). Societies with dominant collectivism culture such as in China and many other developing countries uphold the common good over self-interest and family interests above personal interests. Individualistic cultures such as in the United States weigh the significance on personal interests and desires against that of the community. Significantly, an understanding of the cultural differences greatly assists in designing a type of product or service for the given market and in their marketing and promotional campaigns. Since the Virgin brand companies are not centrally managed, there might be a situation where an inconsistency in vision especially that of a major affiliate company may hamper the goodwill associated with the whole brand name. As a safeguard against such an occurrence, the group might consider the need to make effective oversight policies on each company apart from that provided through the statements of financial performance produced either quarterly, semi or annually. The financing structure of the firm might need more leverage in the form of debt. The current policy as regards financing dictates that the firm’s companies approach high net-worth private investors to fund a large part of the cash flows. This might eventually minimize the firm’s access to extra funds where acute shortages are experienced. The firm might instead think of going public to attain an optimal capital structure within the firm and increase its liquidity ratios. By allowing the public to own part of the companies, the firm can have access to capital in the secondary security market segment i.e. the stock exchange. One thing is evident, that the Virgin brand is not stopping anytime soon. Its ability to identify new enterprising ventures means that the potential for expansion and diversification is limitless. Consumers stand to benefit from the increased consumer approach meaning that in the near future similar services and products offered from competitors will continue to become cheaper, although with a significant compromise on their quality. Works Cited Bowie, Norman E. Business Ethics: A Kantian Perspective. Oxford: Blackwell Publishers, 1999. Print. Complaintsboard. Manta Media,Columbus,Ohio Complaints & Reviews-Unethical Business Practice. 09 March 2010. Web. 16 March 2012 . Ferrel, O. C., John Fraedrich and Ferrel. Business Ethics: Ethical Decision Making and Cases. South-Western College Pub, 2010. Print. Goodall, Sandra, H. L. Goodall and Jill Jr. Schiefelbein. Business and Professional Communication in the Global Workplace. Cengage Learning, 2009. Print. Mill, John Stuart. Utilitarianism. CreateSpace, 2010. Print. Solomon, Robert C. Ethics and Excellence: Cooperation and Integrity in Business (Ruffin Series in Business Ethics). Oxford University Press, 1993. Print. The Philo Cafe. The Cultural Dimension of Business Ethics. Web. 16 March 2012 . Weiss, Joseph W. Business Ethics: A Stakeholder and Issues Management Approach. Cengage learning, 2008. Wood, Allen W. Kant (Blackwell Great Minds). Wiley-Blackwell, 2004. Print. Read More