Source of Sustainable Competitive Advantage of Virgin Group - Case Study Example

VIRGIN Student’s Name Student No Unit Name Word Count Virgin Introduction Virgin Group is the biggest private company in UK. It includes a different mix of businesses, and it is recognized as a leading world brand identity. Founded in 1970, the Group has expanded in various sectors such as mobile telephony, travel, music, transportation, financial services, and media (Virgin 2017). The enterprise has more than 50,000 employees. Besides, it has expanded to at least 300 branded enterprises in 25 different nations. Virgin Group is best known for having a shrewd C.E.O who is enthusiastic about the brand and always puts in on the limelight through marketing and public relations stunts. Arguably, the success of the Virgin is attributed to its unique style of management and the innovativeness of its founder Sir Richard Branson. Corporation Identification A corporation is an entity existing separately from its shareholders and other participants. In other words, it can be regarded as a legal person existing independently from the shareholders who own and manage it (Millon, n.d.,p. 207 ). A corporation has the power to sue and amenity to suit (Drucker, 2009, p. 4). Its durational existence is not limited to the lives of its shareholders. A product portfolio is the range of items sold by a company. It can also be defined as the combination of all the goods or services offered by a company. Most large enterprises have diversified product portfolios that usually expand through acquisitions and product development. Service portfolio is a list of services provided by a service provider. Business Unit Research A business unit is an autonomous division of a large enterprise that functions as an independent business with responsibility for a particular range of products or activities. SBU is an organizational subunit that operates as an independent company in all the main respects including the creation of its competitive strategies and its own marketing plans (Sammut-Bonnici and McGee 2015). It may have the same brand identity as its parent organization or can create one based on the freedom granted to the people managing it. Corporations usually divide their operations into SBU to improve efficiency, niche focus, and efficiently organize the functions of a large diversified company (Shong, 2009, p. 58). It enables organizations to create a strategically focused management structure that is not distracted by the wider product portfolio. SBUs prepare their own strategic, financial, marketing, and sales plans. For SBU’s to function well, there should be an appropriate management style for smooth operation of the whole organization. The Virgin Group consists of several business units. In total, there are 56 business units in the company. The Virgin Travel strategic business unit consists of Virgin Atlantic, Virgin Holidays, Virgin Aviation, Virgin Galatic, and Virgin Holidays (De Wit and Meyer, 2017, p. 518). Every SBU in the Virgin Group is independent and separate. They also do not share a common accounting at the end of the fiscal year. Each one of them functions on its own to accomplish their competitive advantages in their segmented markets. Moreover, decision-making is decentralized, and each SBU is empowered to run independently. A product line is a group of related products under a single brand sold by the same company (Rocha et al., 2015). A company can sell several product lines under their various brands. On the other hand, a service line is a grouping of all products and services related to one particular division of that business. The Virgin Group has different product and service lines. Business Unit Revenue Revenue is the total cash that an enterprise gets within a specified time including the discounts and deductions for returned products (Kolb, 2016, p 15). It is also referred to as the gross income. In the Virgins Travels SBU, Virgin Galatic Virgin Atlantic is the most profitable. In 2016, the pre- profits of Virgin Atlantic soared by 81% to stand £22.5 m (Powley 2016). The record profit that the airline has ever achieved was £99m in 1999. The carrier looks to a brighter future after having posted a profit in two consecutive years. External Business Analysis Environment refers to the surrounding objects, influences, or circumstances that surround an individual or something within which a person exists. In business terms, an environment is the total of all the aggregate events, conditions, and influences that affect an enterprise (Gopal 2009). In other words, it is all things affect the operations of a company. Political Airlines usually operate in a controlled political environment. Particularly, this is due to the recent terrorist attacks and the need to ensure passengers safety. Airline operators are therefore required to more effort and resources to guarantee the safety of all flights. They are also required to incur extra expenses to install their planes with the latest security tools and systems. Economic factors The airline industry is severely affected by the state of the economy. For example, it has never recovered fully from the great recession of 2008. Also, spikes in oil prices push the cost of doing business high. Bad economic times mean that airlines have to deal with low passenger bookings. There is also competition from low-cost airlines that makes it difficult for Virgin Travels to compete favorably with them. Social and Cultural Factors Globally, there is an increment in the number of people using airlines due to rising living standards. Similarly, they are becoming more aware of their rights and demand expectational services. Moreover, they know that the success of a business is on their hands. The profile of passengers has also changed with more economically minded passengers and less business class travelers. On the good side, there is an increase in tourism activities as people seek to visit different places during holidays. Technology Technology affects how airlines interact with passengers from selling them tickets to responding to their feedback. Airlines have to take advantage of advances in technology and incorporate them into their customer service, ticketing, and distribution (Kepner 2016). Social media and other digital platforms have made it possible for airlines to reach more people. However, the public also uses the same technology to compare the best airlines regarding payment and service offered. Travelers can easily compare prices with a click of their computers or smartphones. Customers may demand that airlines adopt the latest technology, which can be expensive. Environment Individuals have become more aware of the damages that businesses do to the environment and therefore demand accountability. Firms that are environmentally friendly have a good reputation and can attract customers (Kepner 2016). Those that are seen to contribute to environment degradation often face a backlash from the public. Most importantly, businesses are required to come up with green practices that place them ahead of their competitors. For the airline industry, this can be in the form of reduced carbon dioxide emissions or less fuel use. This trend could affect airline operators that fail or are slow to comply. Legal Worldwide, regulators are becoming stricter with airlines. This means that they have to make sure that they comply with the stringent laws or face fines or even a revocation of their licenses. Also, the industry is synonymous with lawsuits from both customers and workers due to delays and safety issues. Lawsuits are usually costly to businesses and can damage their reputation Source of Sustainable Competitive Advantage In general, the Virgin Group has several competitive advantages that give it an edge over its competitors. Here are some of the main ones: 1. Media Relations: Virgin Group founder Richard Branson is known for great advertising and innovative branding Branson has unique capabilities of successfully employing the media to grow Virgin’s public awareness (Sadq, 2016, p. 79). Besides, he has an excellent charisma and superior negotiation skills that are an added advantage to Virgin Group. Branson is known for his marketing and publicity stunts. For example, he tried flying around the world in a hot air balloon. At one instance, he put on a wedding dress to publicize his retail store the Virgin Brides. All his actions have contributed significantly to the success of the company. 2. Satisfied Customer Base: Virgin Group has a happy client base and a preferred airline of high paying customers. The Virgin brand is considered the gold standard in customer service. Branson is always checks how the Group’s companies are managed. He regularly meets with employees, talks to cabin crews, and solicits for feedback from passengers (Gallo, 2013). For the brand, customer experience comes first above everything else. Its employees are also empowered to provide solutions to problems and make every experience worthwhile (Buttle and Maklan, 2015, p. 106). Besides that, they are well trained on how to satisfy workers. 3. Brand recognition: it enjoys brand recognition. The enterprise continues to leverage on its brand name that 's hard to imitate by its competitors. Branson managed to grow the enterprise under the brand name Virgin group (Sadq, 2016, p. 79). Virgin is valuable to the equity of the brand. The name has positive perceptions of its customers and it is linked with words like value for money, freshness, and success. 4. Unique Management Style: it has a unique management style that has minimal hierarchy and management levels (Grant, 2016, p. 665). It has a flat management system that facilitates innovation. Its decisions are decentralized which provides an optimum environment where managers can make independent decisions that they are also held accountable for. Above all, the group has managed to establish competitive advantage among its rivals by offering different quality products and services to their clients. For example, each of the airlines under the group is independent. Also, the airlines are allowed to independently develop a quality of jets that are new which enables them to be unique in the industry. The Group’s core competencies are to produce goods that are a little bit different from the others. Virgin makes sure that it adds values to the ventures by adding a little fun. Strategic Direction Strategic direction is arrived at when a company analyzes the position that it is in now and where it is heading in future. Organizations strive to forecast where they would be in future if they continue with the same course (Harrison and St. John, 2009, p. 79). Going forward, the Virgin travel can implement the following strategies: Acquire competitors: the Virgin group can buy some of its competitors in the industry or enter into mergers. It can also enter into partnerships with their competitors depending on the prevailing market forecasts and conditions (Delfmann, 2008, p. 2). Also, some situations such as regulations would require it to enter into partnerships with other businesses. For instance, in the U.S. airline industry, global private businesses are not permitted to own majority stake in American companies. For this reason, the Virgin group has a 25% stake in Virgin America. The other benefit of entering into partnerships is that it makes it possible to reduce as many risks as possible. Kepner (2016) says that cooperative strategies have enabled the Virgin Group to utilize other companies strenghts to their advantage. Moreover, it has allowed it to differentiate their products and services. Notably, the access to capital, skills, and knowledge results in a more differentiated brand. 1. The Virgin Travels could consider expanding into new markets that are untapped. The same strategy is being implemented by Easy Jet, which is diversifying into a number of areas such as insurance (Bowhill, 2014, p. 405). Already, the SBU has invested in airlines, hot air balloons, and space travel. It should focus on looking for new areas in businesses that it believes that it can create value. They can achieve this by analyzing the present level of service in an industry then highlighting the complacencies in the areas of values. They can then enter into that market in many ways one being through offering competitive prices. Knecht (2014) says that companies should approach diversification with care since its success is selective. However, the Virgin Group is one of the successful companies that have learned the art of diversification. 2. Virgin Travels needs to take notice of the demanding safety regulations that each country enforces. The requirements may vary from one location to another thus making it difficult to implement (Kepner 2016). So far, the SBU operates in stable countries to reduce the security concerns that may be raised by concerned countries. 3. Since it operates in different regions, the company should find a way of understanding cultural differences of where it operates (Ferraro, 2010, p. 28). This may mean training its managers and personnel afresh to avoid issues of misunderstanding, culture clash, and language barriers (Kepner 2016). Some of the global businesses have found it rough establishing their bases in foreign countries after they disregarded local way of doing business. Conclusion In general, Richard Branson is considered the pillar of the Virgin Group. His creative ideas and strategies have seen the group grow from a single business to 300 brands in different parts of the world. Several SBU operates within the enterprise one being the Virgin Travels. The Virgin Travels has brands such as Virgin Airlines, Virgin Balloons, and Virgin Galatic. The success of the SBU is dependent on political, economic, social, technological, environmental, and legal factors. For example, most countries demand that airlines abide by their strict regulations regarding customer’s safety. Regarding social factors, most people are becoming economical with their money, which may affect the SBU revenues since it targets the high-end client. 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